<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
WASTE MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4953 73-1309529
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification Number)
Incorporation or Code Number)
Organization)
1001 FANNIN STREET
SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
GREGORY T. SANGALIS
WASTE MANAGEMENT, INC.
1001 FANNIN STREET
SUITE 4000
HOUSTON, TX 77002
(713) 512-6200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
COPIES TO:
JOHN A. MARZULLI, JR. H. JOHN MICHEL, JR.
SHEARMAN & STERLING 599 JAMES BIEHL
LEXINGTON AVENUE DRINKER BIDDLE & REATH LLP
NEW YORK, NY 10022 1345 CHESTNUT STREET, SUITE
(212) 848-4000 1100
PHILADELPHIA, PA 19107-3496
(215) 988-2700
Approximate date of commencement of proposed sale to the public: As promptly
as practicable after this Registration Statement becomes effective and the
effective time of the proposed merger of Ocho Acquisition Corporation, a
wholly owned subsidiary of the Registrant, with and into Eastern Environmental
Services, Inc. ("Eastern") as described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED BE REGISTERED(1) PER SECURITY OFFERING PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share....... 25,155,000 Not Applicable $1,087,184,269.19 $320,719.36
</TABLE>
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(1) Based on the maximum number of shares of Common Stock that the Registrant
may be required to issue in connection with the Merger calculated as the
product of (a) 39,266,249, the sum of (i) the number of shares of common
stock of Eastern, par value $0.01 per share ("Eastern Common Stock"),
outstanding on September 22, 1998, (ii) the number of shares of Eastern
Common Stock issuable pursuant to outstanding stock options through the
date the Merger is expected to be consummated, (iii) the number of shares
of Eastern Common Stock issuable upon conversion, prior to the date the
Merger is expected to be consummated, of outstanding convertible
securities of Eastern and (iv) the number of shares of Eastern Common
Stock otherwise expected to be issued prior to the date the Merger is
expected to be consummated and (b) an exchange ratio of 0.6406 of a share
of Common Stock for each share of Eastern Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f)(1) and Rule 457(c)
thereunder on the basis of the market value of the Eastern Common Stock to
be exchanged in the Merger, as the product of (a) $27.6875 (the average of
the high and low sales prices per share of Eastern Common Stock as
reported on the Nasdaq National Market on September 21, 1998) and (b)
39,266,249, the sum of (i) the number of shares of Eastern Common Stock
outstanding on September 22, 1998, (ii) the number of shares of Eastern
Common Stock issuable pursuant to outstanding stock options through the
date the Merger is expected to be consummated, (iii) the number of shares
of Eastern Common Stock issuable upon conversion, prior to the date the
Merger is expected to be consummated, of outstanding convertible
securities of Eastern and (iv) the number of shares of Eastern Common
Stock otherwise expected to be issued prior to the date the Merger is
expected to be consummated.
(3) Pursuant to Rule 457(b) under the Securities Act, the registration fee has
been reduced by the $187,304.00 paid on September 1, 1998 in connection
with the filing under the Securities Exchange Act of 1934, as amended, of
preliminary copies of the proxy materials included herein. Therefore, the
registration fee payable upon the filing of this Registration Statement is
$133,415.36.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
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<PAGE>
PROXY STATEMENT FOR SPECIAL MEETING
OF STOCKHOLDERS OF
[LOGO OF EASTERN ENVIRONMENTAL SERVICES, INC.]
TO BE HELD ON NOVEMBER 5, 1998
----------------
WASTE MANAGEMENT, INC. PROSPECTUS
The Board of Directors of Eastern Environmental Services, Inc. and Waste
Management, Inc. have agreed to merge Eastern with a subsidiary of Waste
Management. Eastern would become a wholly owned subsidiary of Waste Management
and Waste Management would pay to Eastern stockholders 0.6406 of a share of
Waste Management common stock for each share of Eastern common stock that they
own.
The merger cannot be completed unless Eastern stockholders approve and adopt
the merger agreement. The Eastern Board of Directors has scheduled a special
meeting of Eastern stockholders to vote on the merger as follows:
Thursday, November 5, 1998
10:00 a.m.
Radisson Hotel Mt. Laurel
915 Route 73N
Mt. Laurel, New Jersey 08054
This document gives you detailed information about the proposed merger. YOU
SHOULD READ THIS DOCUMENT CAREFULLY, PARTICULARLY THE SECTIONS ENTITLED "THE
MERGER -- REASONS FOR THE MERGER; RECOMMENDATION OF THE EASTERN BOARD"
BEGINNING ON PAGE 21 AND "RISK FACTORS" BEGINNING ON PAGE 12. Waste Management
has provided the information concerning Waste Management and Eastern has
provided the information concerning Eastern. Please see "Where You Can Find
More Information" beginning on page 52 for additional information about
Eastern and Waste Management on file with the United States Securities and
Exchange Commission.
This Proxy Statement/Prospectus and proxy are first being mailed to
stockholders of Eastern beginning on or about , 1998.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved the shares of Waste Management common stock to be
issued under this Proxy Statement/Prospectus or determined if this Proxy
Statement/Prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
The date of this Proxy Statement/Prospectus is , 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................ (iii)
SUMMARY................................................................... 1
Selected Financial Information.......................................... 7
Waste Management Summary Selected Supplemental Financial Information.... 8
Eastern Summary Selected Historical Financial Information............... 9
Comparative Per Share Information....................................... 10
Market Price and Dividend Information................................... 11
RISK FACTORS.............................................................. 12
Risks Relating to the Merger............................................ 12
Risks Relating to the Industry.......................................... 12
THE SPECIAL MEETING....................................................... 16
General; Date, Time and Place........................................... 16
Purposes of the Special Meeting......................................... 16
Recommendation of the Eastern Board..................................... 16
Stockholders Entitled to Vote; Vote Required............................ 16
Proxies................................................................. 17
THE MERGER................................................................ 19
Background of the Merger................................................ 19
Reasons for the Merger; Recommendation of the Eastern Board............. 21
Opinion of Salomon Smith Barney......................................... 22
Interests of Certain Persons in the Merger.............................. 27
Certain Federal Income Tax Consequences................................. 29
Accounting Treatment.................................................... 30
Regulatory Approvals.................................................... 31
Federal Securities Laws Consequences.................................... 31
Stock Exchange Quotation................................................ 31
No Appraisal Rights..................................................... 32
Certain Legal Proceedings............................................... 32
THE MERGER AGREEMENT...................................................... 32
Effective Time of the Merger............................................ 32
Manner and Basis for Converting Shares.................................. 32
Exchange and Cancellation of Eastern Options............................ 33
Conversion of Eastern Warrants.......................................... 34
Conditions to the Merger................................................ 34
Cooperation............................................................. 36
Representations and Warranties of Waste Management and Eastern.......... 36
</TABLE>
<TABLE>
<S> <C>
Conduct of the Business of Waste Management and Eastern Prior to the
Merger................................................................. 37
No Solicitation of Acquisition Transactions.............................. 39
Conduct of the Business of the Combined Companies Following the Merger... 40
Termination or Amendment................................................. 40
Termination Fees......................................................... 41
Expenses................................................................. 41
Indemnification.......................................................... 41
STOCKHOLDERS AGREEMENT..................................................... 43
THE COMPANIES.............................................................. 44
Waste Management......................................................... 44
Eastern.................................................................. 44
COMPARATIVE PER SHARE INFORMATION.......................................... 46
MARKET PRICE AND DIVIDEND INFORMATION...................................... 47
Market Prices............................................................ 47
Dividends................................................................ 47
DESCRIPTION OF WASTE MANAGEMENT CAPITAL STOCK.............................. 48
Authorized Capital Stock................................................. 48
Common Stock............................................................. 48
Preferred Stock.......................................................... 48
The DGCL and Certain Provisions of Waste Management's Certificate of
Incorporation........................................................... 48
Transfer Agent and Registrar............................................. 49
COMPARISON OF STOCKHOLDER RIGHTS........................................... 49
Number, Classification and Removal of Directors.......................... 49
Advance Notice of Stockholder Proposals.................................. 49
Right to Call Special Meetings........................................... 50
Transactions with Interested Stockholder; DGCL Section 203............... 50
Amendment of Charter and Bylaws.......................................... 50
STOCKHOLDER PROPOSALS...................................................... 51
LEGAL MATTERS.............................................................. 51
EXPERTS.................................................................... 51
WHERE YOU CAN FIND MORE INFORMATION........................................ 52
Annex A--Agreement and Plan of Merger
Annex B--Opinion of Salomon Smith Barney
Annex C--Stockholders Support Agreement
</TABLE>
(i)
<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<S> <C>
Acquisition Proposal........................................................ 39
Acquisition Transaction..................................................... 39
Allied...................................................................... 19
AMV......................................................................... 24
Annual Meeting.............................................................. 51
Business Combination........................................................ 41
Cal-EPS..................................................................... 24
Closing Date................................................................ 23
Code........................................................................ 29
Commission.................................................................. 34
Comparable Companies........................................................ 25
currently exercisable....................................................... 45
DCF......................................................................... 26
DGCL........................................................................ 32
DOJ......................................................................... 31
Eastern..................................................................... 16
Eastern Board............................................................... 16
Eastern Bylaws.............................................................. 29
Eastern Charter............................................................. 29
Eastern Common Stock........................................................ 16
Eastern Option.............................................................. 33
EBIT........................................................................ 24
EBIT Margin................................................................. 25
EBITDA...................................................................... 24
EBITDA Margin............................................................... 25
Effective Time.............................................................. 32
EPS......................................................................... 24
Excess Shares............................................................... 32
Exchange Act................................................................ 31
Exchange Agent.............................................................. 32
Exchange Ratio.............................................................. 16
FTC......................................................................... 31
Gross Margin................................................................ 25
HSR Act..................................................................... 31
indemnified Party........................................................... 42
Interested Stockholder...................................................... 50
</TABLE>
<TABLE>
<S> <C>
IRS......................................................................... 30
Kramer Agreement............................................................ 28
L-T Debt.................................................................... 25
LTM......................................................................... 24
LTM-EBIT.................................................................... 25
LTM-EBITDA.................................................................. 25
LTM-NI...................................................................... 24
LTM-Sales................................................................... 24
Merger...................................................................... 16
Merger Agreement............................................................ 16
Net Margin.................................................................. 25
NYSE........................................................................ 27
Ocho Acquisition............................................................ 16
Paolino Agreement........................................................... 27
P/E......................................................................... 25
Record Date................................................................. 16
Salomon..................................................................... 19
Salomon Opinion............................................................. 22
Salomon Report.............................................................. 23
Section 203................................................................. 50
Securities Act.............................................................. 31
Sensitivity Case............................................................ 26
Special Meeting............................................................. 16
Stockholders Agreement...................................................... 17
Superior Proposal........................................................... 39
Surviving Corporation....................................................... 16
Tax Opinions................................................................ 30
Termination Date............................................................ 40
Waste Management Board...................................................... 48
Waste Management Bylaws..................................................... 48
Waste Management Charter.................................................... 48
Waste Management Common Stock............................................... 16
Waste Management Holdings Merger............................................ 7
Waste Management Preferred Stock............................................ 48
WM International............................................................ 44
</TABLE>
(ii)
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
In this document, we make forward-looking statements that include
assumptions as to how Eastern and Waste Management may perform in the future.
You will find many of these statements in the following sections:
. "Risk Factors" beginning on page 12;
. "The Companies" beginning on page 44; and
. "The Merger--Reasons for the Merger; Recommendation of the Eastern Board"
beginning on page 21.
Also, when we use words like "may," "may not," "believes," "does not
believe," "expects," "does not expect," "anticipates," "does not anticipate"
and similar expressions, we are making forward-looking statements. Such
statements should be viewed with caution.
Actual results or experience could differ materially from the forward-
looking statements as a result of many factors, including those factors set
forth under the caption "Risk Factors" beginning on page 12 and certain
additional factors such as the ability of the companies to meet price
increases and new business sales goals, fluctuation in recyclable commodity
prices, weather conditions, slowing of the overall economy, increased interest
costs arising from a change in the companies' leverage, failure of the
companies' plans to produce anticipated cost savings, the timing and magnitude
of capital expenditures, inability to obtain or retain permits necessary to
operate disposal or other facilities or otherwise complete project development
activities and inability to complete contemplated dispositions of the
companies' businesses and assets at anticipated prices and terms. Waste
Management and Eastern make no commitments to disclose any revisions to
forward-looking statements, or any facts, events or circumstances after the
date hereof that may bear upon forward-looking statements.
In addition, Eastern stockholders should consider carefully the information
set forth under the following captions, all of which are incorporated by
reference herein:
. "Business" and "Legal Proceedings" in Part I of Waste Management's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997,
. "Management's Discussion and Analysis of Financial Conditions and Results
of Operations" in Waste Management's Current Report on Form 8-K dated
September 24, 1998,
. "Business" and "Legal Proceedings" in Part I of Eastern's Transition
Report on Form 10-K for the six months ended December 31, 1997, and
. "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in Eastern's Current Report on Form 8-K dated September
22, 1998.
In making these forward-looking statements in this document and in the
documents that are incorporated by reference, Eastern and Waste Management
claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. Neither
Waste Management nor Eastern assumes any obligation to update these forward-
looking statements to reflect actual results, changes in assumptions or
changes in other factors affecting such forward-looking statements.
(iii)
<PAGE>
SUMMARY
This Summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See "Where You Can Find More Information" (page
52). The merger agreement is attached as Annex A to this document. We encourage
you to read the merger agreement, as it is the legal document that governs the
merger. For the location of definitions of capitalized terms used in this Proxy
Statement/Prospectus, please see "List of Defined Terms" (page ii).
THE COMPANIES (PAGES 44 AND 45)
WASTE MANAGEMENT, INC.
1001 Fannin, Suite 4000
Houston, Texas 77002
(713) 512-6200
On July 16, 1998, Waste Management (formerly known as USA Waste Services,
Inc.) consummated a merger with Waste Management Holdings, Inc. (formerly known
as Waste Management, Inc.) whereby Waste Management Holdings was merged with
and into a wholly owned subsidiary of Waste Management. Upon consummation of
the merger, USA Waste Services, Inc. changed its name to Waste Management, Inc.
and Waste Management, Inc. changed its name to Waste Management Holdings, Inc.
Waste Management is a leading international provider of waste management
services. It is the largest waste management services company in North America
and has an extensive network of landfills, collection operations and transfer
stations throughout North America. Waste Management also provides a wide range
of solid and hazardous waste management services outside North America in seven
countries in Europe, seven countries in the Asia-Pacific region and Argentina,
Brazil and Israel.
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 Crawford Place, Suite 400
Mt. Laurel, New Jersey 08054
(609) 235-6009
Eastern is a non-hazardous solid waste management company specializing in the
collection, transportation, and disposal of residential, industrial, commer-
cial, and special waste, principally in the eastern United States. Eastern cur-
rently provides solid waste collection services to approximately 46,000 commer-
cial and industrial customers and approximately 400,000 residential customers.
OCHO ACQUISITION CORPORATION
1001 Fannin, Suite 4000
Houston, Texas 77002
(713) 512-6200
Ocho Acquisition is a Delaware corporation formed by Waste Management on Au-
gust 13, 1998, for use in the merger. This is the only business of Ocho Acqui-
sition.
REASONS FOR THE MERGER (PAGES 21 AND 22)
The Eastern Board believes that the merger is in the best interests of East-
ern and its stockholders. In reaching its decision to approve the merger, the
Eastern Board considered a number of factors, including the following:
. The opportunity for Eastern stockholders to become stockholders of Waste
Management, which the board of directors of Eastern viewed as a larger,
better capitalized and more geographical diversified company than East-
ern;
. The experience, depth, and competence of Waste Management's operating
team;
. The structure of the merger, which is designed to be tax free and ac-
counted for as a pooling of interests. (For a more comprehensive descrip-
tion of the accounting treatment and the federal income tax consequences
of the merger, see pages 29 and 30);
. The written opinion of Salomon Smith Barney that the share exchange ratio
was fair to the Eastern stockholders from a financial point of view. The
full text of Salomon Smith Barney's opinion is attached as Annex B to
this Proxy Statement/Prospectus, and you are urged to read it carefully
and in its entirety; and
1
<PAGE>
. The other factors discussed under the caption "Reasons for the Merger;
Recommendation of the Eastern Board" beginning on page 21.
To review the reasons for the merger in greater detail, see pages 21 and 22.
RECOMMENDATION OF THE EASTERN BOARD (PAGES 21 AND 22)
The board of directors of Eastern has unanimously approved the merger agree-
ment and the transactions contemplated thereby, including the merger, and unan-
imously recommends that you vote in favor of the approval and adoption of the
merger agreement.
PURPOSES OF THE SPECIAL MEETING (PAGE 16)
The purposes of the special meeting are to consider and vote upon:
. a proposal to approve and adopt the merger agreement; and
. such other business as may properly be brought before the special meet-
ing.
DATE, TIME AND PLACE OF THE SPECIAL MEETING (PAGE 16)
The special meeting will be held on Thursday, November 5, 1998, at the
Radisson Hotel Mt. Laurel, 915 Route 73N, Mt. Laurel, New Jersey 08054 commenc-
ing at 10:00 a.m., local time.
STOCKHOLDERS ENTITLED TO VOTE AT THE SPECIAL MEETING; VOTES REQUIRED (PAGES 16
AND 17)
The close of business on September 25, 1998 is the record date for the spe-
cial meeting. Only Eastern stockholders on the record date are entitled to no-
tice of and to vote at the special meeting. On the record date, there were
[ ] shares of Eastern common stock outstanding. Each share of Eastern com-
mon stock will be entitled to one vote on each matter to be acted upon at the
special meeting.
A majority vote of the shares of Eastern common stock outstanding on the rec-
ord date is required to adopt the merger agreement.
INTERESTS OF CERTAIN PERSONS/STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE
OFFICERS OF EASTERN (PAGES 27 THROUGH 29)
In determining how to vote at the special meeting, you should be aware that
certain officers and directors of Eastern may have interests in the merger that
are different from your and their interests as stockholders. These include the
following:
. As of September 25, 1998, the record date, approximately [ ] shares of
Eastern common stock were subject to options or warrants granted to exec-
utive officers and directors under Eastern's equity-based compensation
plans. Pursuant to the merger agreement, Eastern has agreed to use com-
mercially reasonable efforts to ensure that all outstanding options to
purchase Eastern common stock, whether or not then vested and exercis-
able, will be canceled. Each optionee that has options canceled will re-
ceive a number of shares of Waste Management common stock equal in value
(based on the average closing price of Waste Management common stock on
the New York Stock Exchange for the 10 trading days immediately prior to
the completion of the merger) to the fair value of such options as deter-
mined by independent third party experts. Waste Management will assume
each option that is not canceled as of the effective time of the merger
and such option will be converted into an option to purchase an appropri-
ate number of shares of Waste Management common stock, with corresponding
adjustments to the exercise price of such options.
. Certain executive officers of Eastern are parties to agreements that pro-
vide for the payment of bonuses upon the occurrence of a "change of con-
trol" of Eastern and for certain severance payments and benefits, as well
as the accelerated vesting of options and warrants upon the occurrence of
a merger in which Eastern is not the surviving entity or upon a "change
in control." In addition, in consideration of the cancellation of their
existing employment arrangements with Eastern, two executive officers of
East-
2
<PAGE>
ern have agreed to enter into agreements with Waste Management pursuant
to which they will receive additional payments and annuities from Waste
Management at and subsequent to the effective time of the merger.
. The indemnification obligations of Eastern to each present and former di-
rector and officer of Eastern will continue for a period of six years and
Waste Management will cause the current policies (or policies providing
similar coverage) of directors' and officers' liability insurance to re-
main in effect for a period of six years.
Louis D. Paolino, Jr. and five other current directors or executive officers
of Eastern who own an aggregate of [ ] shares of Eastern common stock, rep-
resenting [ ]% of the shares of Eastern common stock entitled to vote at the
special meeting, have entered into a stockholders agreement with Waste Manage-
ment and Ocho Acquisition, whereby they appointed Ocho Acquisition as their
proxy to vote each of such shares in favor of the adoption of the merger agree-
ment and approval of the merger and against any transaction pursuant to an ac-
quisition proposal or which could result in any of the conditions of Eastern's
obligations under the merger agreement not being fulfilled. As of September 25,
1998, the record date, current directors and executive officers of Eastern (in-
cluding the six directors or executive officers who are parties to the stock-
holders agreement) and their affiliates may be deemed to be beneficial owners
of approximately [ ] shares of Eastern common stock, representing [ ]% of
the shares of Eastern common stock entitled to vote at the special meeting.
Each of such directors and executive officers of Eastern has advised Eastern
that he or she intends to vote all such shares in favor of the approval and
adoption of the merger agreement.
In addition, Waste Management is the record owner of 655,000 shares of East-
ern common stock representing approximately [ ]% of the shares of Eastern com-
mon stock entitled to vote at the special meeting and will vote all of such
shares in favor of the approval and adoption of the merger agreement.
OPINION OF FINANCIAL ADVISOR (PAGES 22 THROUGH 27)
In deciding to approve the merger, the board of directors of Eastern consid-
ered the opinion of its financial advisor, Salomon Smith Barney, that the share
exchange ratio was fair to Eastern stockholders from a financial point of view.
The full text of the written opinion of Salomon Smith Barney, which sets
forth assumptions made, matters considered and limitations on the review under-
taken, is attached hereto as Annex B. The written opinion of Salomon Smith Bar-
ney is not a recommendation as to how you should vote in regard to the approval
and adoption of the merger agreement. WASTE MANAGEMENT AND EASTERN ENCOURAGE
YOU TO READ THE OPINION OF SALOMON SMITH BARNEY IN ITS ENTIRETY.
THE MERGER
EFFECTS OF THE MERGER (PAGES 32 THROUGH 34)
In the merger, Ocho Acquisition will be merged with and into Eastern. Eastern
will be the surviving corporation and will continue as a wholly owned subsidi-
ary of Waste Management. As a result of the merger, you will be entitled to re-
ceive 0.6406 of a share of Waste Management common stock for each share of
Eastern common stock that you own. You will not receive fractional shares of
Waste Management common stock. Instead, you will receive a cash payment for any
fractional shares you might otherwise have been entitled to receive, based on
the market value of the Waste Management common stock.
Each unexpired warrant to purchase shares of Eastern common stock will be au-
tomatically converted into a warrant to purchase a number of shares of Waste
Management common stock equal to the product of:
. the number of shares of Eastern common stock that could be purchased
under such warrant; and
. 0.6406.
The exercise price per share of each converted warrant will be equal to the
result of:
. the exercise price per share of Eastern common stock under the original
warrant; divided by
. 0.6406.
3
<PAGE>
Eastern will use commercially reasonable efforts to cancel all stock options
granted pursuant to Eastern stock option plans. In exchange, each optionholder
will receive that number of shares of Waste Management common stock equal in
value (based upon the average of the closing prices of Waste Management common
stock on the New York Stock Exchange for the 10 trading days immediately prior
to the consummation of the merger) to the fair value of such options as deter-
mined by independent third party experts. Each option not canceled as set forth
above will be assumed by Waste Management and will become an option to purchase
that number of shares of Waste Management common stock equal to the product of:
. the number of shares of Eastern common stock issuable upon exercise of
such option; and
. 0.6406.
The exercise price per share of each converted option will be equal to the
result of:
. the exercise price per share of Eastern common stock under the original
option; divided by
. 0.6406.
In the case of any Eastern stock option to which Section 421 of the Internal
Revenue Code of 1986, as amended, applies, the exercise price and the number of
shares purchasable pursuant to such Eastern stock option will be determined in
order to comply with Section 424(b) of the Internal Revenue Code.
CONDITIONS TO THE MERGER (PAGES 34 THROUGH 36)
Waste Management's and Eastern's obligations to complete the merger are sub-
ject to the satisfaction or waiver of several conditions, including the follow-
ing:
. Eastern stockholders must approve and adopt the merger agreement;
. the shares of Waste Management to be issued in the merger and reserved
for issuance upon exercise of Eastern stock options or warrants must be
authorized for listing on the New York Stock Exchange;
. the waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, must come to an end;
. there must not be any court order or law which effectively prohibits the
merger or makes the merger illegal;
. all approvals from relevant governmental authorities material to the
merger must have been obtained;
. Arthur Andersen LLP, independent public accountants for Waste Management,
must provide a letter to the effect that the merger will qualify for
pooling of interests accounting treatment;
. Waste Management and Eastern must receive a letter from Ernst & Young
LLP, independent auditors for Eastern, regarding its concurrence with the
conclusions of each company's management that no conditions related to
Eastern exist that would preclude Waste Management's accounting for the
merger as a pooling of interests;
. Waste Management and Eastern must certify to the other that its represen-
tations and warranties contained in the merger agreement are materially
true and correct and that it has performed all of its material obliga-
tions under the merger agreement;
. Waste Management and Eastern must receive an opinion from their respec-
tive tax counsel that the merger will qualify as a tax-free reorganiza-
tion; and
. Eastern must receive all material approvals from its lenders regarding
the merger.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES AND EXPENSES (PAGES 40
AND 41)
Waste Management and Eastern can agree to terminate the merger agreement
without completing the merger and either company can terminate the merger
agreement if any of the following occurs:
. the other party materially breaches the merger agreement and does not
cure such breach in all material respects;
4
<PAGE>
. the merger is not completed by March 31, 1999;
. a court order permanently prohibits the merger; or
. the other party fails to perform a material covenant in the merger agree-
ment and does not cure such default within 30 days after receiving writ-
ten notice of such default.
Eastern may terminate the merger agreement if either of the following occurs:
. Eastern receives and accepts a more favorable competing offer, provides
Waste Management with sufficient notice of its termination as required by
the merger agreement and pays the termination fee described below; or
. Eastern receives a tender offer or exchange offer from a potential ac-
quirer that the board of directors of Eastern considers to be a more fa-
vorable competing offer, provides Waste Management with sufficient notice
of its decision to terminate as required by the merger agreement and pays
the termination fee described below.
Waste Management may terminate the merger agreement if either of the
following occurs:
. the board of directors of Eastern accepts a more favorable competing of-
fer or recommends to its stockholders that they sell their shares to a
third party in a tender offer or exchange offer (in which case, Eastern
must pay the termination fee described below); or
. Eastern's stockholders fail to approve the merger.
As noted above, under certain circumstances, if the merger agreement is ter-
minated, Eastern may be required to pay Waste Management a termination fee
equal to $35 million.
All costs and expenses will be paid by the party incurring them, other than
the expenses for this Proxy Statement/Prospectus which will be shared equally
by Waste Management and Eastern.
REGULATORY APPROVALS (PAGE 31)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, prohib-
its Waste Management and Eastern from completing the merger until we have fur-
nished certain information and materials to the Antitrust Division of the De-
partment of Justice and the Federal Trade Commission and the required waiting
period has ended. The waiting period may be extended by requests for additional
information. On August 24, 1998, Waste Management and Eastern each filed the
required notification and report forms with the Federal Trade Commission and
the Antitrust Division. On September 23, 1998 each of Waste Management & East-
ern received a Request for Additional Documents and Other Additional Informa-
tion with respect to the merger. The time period for the Department of Justice
to review the merger will be terminated 20 days following substantial compli-
ance by both Waste Management and Eastern with the second request. Thereafter,
the waiting period may be extended only by court order or the consent of the
parties.
Consummation of the merger is conditioned upon all material governmental con-
sents, approvals and authorizations legally required for the consummation of
the merger and the transactions contemplated thereby having been obtained and
being in effect. Certain other state and local governmental filings are re-
quired to be made in connection with the merger. Waste Management and Eastern
expect that none of the required consents, approvals or authorizations would
prohibit the consummation of the merger. However, no assurance can be given
that the required consents, approvals and authorizations will be obtained.
In addition, Waste Management and Eastern have agreed to cooperate with each
other in obtaining the approvals referred to above. See "The Merger Agreement--
Cooperation."
NO APPRAISAL RIGHTS (PAGE 32)
You have no right to an appraisal of the value of your shares in connection
with the merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (PAGES 29 AND 30)
It is a condition to the merger that Waste Management and Eastern each have
received an opinion of tax counsel to the effect that the merger will
5
<PAGE>
constitute a tax-free reorganization. In that case, none of Waste Management,
Eastern or the Eastern stockholders will recognize any gain or loss for federal
income tax purposes (except that Eastern stockholders who receive cash instead
of fractional shares may recognize a gain or loss in respect of that cash for
federal income tax purposes).
THE TAX CONSEQUENCES OF THE MERGER TO YOU MAY DEPEND ON THE FACTS OF YOUR OWN
SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE
TAX CONSEQUENCES OF THE MERGER TO YOU.
ACCOUNTING TREATMENT (PAGE 30)
We expect the merger to qualify as a pooling of interests for accounting and
financial reporting purposes, which means that Waste Management and Eastern
will be treated as if they had always been combined for accounting and finan-
cial reporting purposes.
RISK FACTORS (PAGES 12 THROUGH 15)
There are risk factors that should be considered by you in evaluating how to
vote at the special meeting. Such risk factors include the following:
. fixed exchange ratio despite change in relative stock prices;
. continued risks related to the merger of a subsidiary of Waste Management
with and into Waste Management Holdings which was consummated on July 16,
1998;
. risks inherent in the industry or particular to Waste Management,
including those related to competition, government regulation and
potential environmental liability; and
. risks generally associated with acquisitions and the expansion of Waste
Management's existing operations.
CERTAIN LEGAL PROCEEDINGS (PAGE 32)
On August 18, 1998, a stockholder of Eastern filed a purported class action
suit in the Chancery Court of the State of Delaware in New Castle County
against Eastern and certain of its directors. The complaint alleges, among
other things, that (i) the merger consideration to be paid to the members of
the purported class is unfair and inadequate, (ii) the defendants have failed
to announce any active or open bidding procedures, inhibiting the maximization
of shareholder value, (iii) the defendants have breached their fiduciary duties
to the members of the class, and (iv) the members of the class will be damaged
and prevented from obtaining appropriate consideration for their shares, to the
irreparable harm of the class. The complaint seeks equitable and injunctive
relief that would enjoin or rescind the merger, as the case may be, unless
Eastern adopts and implements a plan to obtain the highest possible price for
Eastern common stock, and would award the members of the class appropriate
damages and costs. Eastern believes the suit to be without merit and intends to
contest it vigorously.
SURRENDER OF CERTIFICATES (PAGES 32 AND 33)
After the merger, Waste Management will mail a letter to you with instruc-
tions for exchanging your stock certificates for certificates representing
shares of Waste Management common stock and a cash payment in lieu of frac-
tional shares, if any. YOU SHOULD NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
6
<PAGE>
SELECTED FINANCIAL INFORMATION
SELECTED SUPPLEMENTAL FINANCIAL INFORMATION OF WASTE MANAGEMENT
The following selected supplemental financial information of Waste Management
for each of the five years in the period ended December 31, 1997 and the six
months in the period ended June 30, 1997 and 1998 presents the consummation of
the merger (the "Waste Management Holdings Merger") of a wholly owned
subsidiary of Waste Management with Waste Management Holdings, Inc. ("Waste
Management Holdings") using the pooling of interests method of accounting
pursuant to Opinion No. 16 of the Accounting Principles Board and related
interpretations thereof. The supplemental financial information for each of the
five years in the period ended December 31, 1997 has been derived from audited
historical financial statements of Waste Management and Waste Management
Holdings. The supplemental financial information for the six months in the
period ended June 30, 1997 and 1998 has been derived from unaudited historical
financial statements of Waste Management and Waste Management Holdings and
reflects all adjustments management considers necessary for a fair presentation
of the financial position and results of operations for these periods. This
supplemental financial information does not extend through the date of
consummation of the Waste Management Holdings Merger; however, such information
will become the historical financial information of Waste Management after
financial statements covering the date of consummation of the Waste Management
and Waste Management Holdings Merger are issued. The selected supplemental
financial information of Waste Management should be read in conjunction with
the respective historical financial statements and notes thereto of Waste
Management and Waste Management Holdings and the audited supplemental financial
statements and notes thereto of Waste Management as of December 31, 1996 and
1997 and the three years in the period ended December 31, 1997 incorporated by
reference herein. See "Where You Can Find More Information."
SELECTED HISTORICAL FINANCIAL INFORMATION OF EASTERN
The following table presents selected historical consolidated statement of
operations, balance sheet and other operating data of Eastern as of the dates
and for the periods indicated. The historical financial information has been
derived from Eastern's audited consolidated financial statements. The
historical financial information for the six months in the period ended June
30, 1997 and 1998 has been derived from unaudited historical financial
information of Eastern. The selected historical financial information of
Eastern should be read in conjunction with Eastern's audited consolidated
financial statements and notes thereto at December 31, 1997 and June 30, 1997
and 1996, and for the six month period ended December 31, 1997 and for each of
the three years in the period ended June 30, 1997 incorporated by reference
herein. See "Where You Can Find More Information."
PRO FORMA FINANCIAL INFORMATION
No pro forma information relating to the merger is presented herein because
the merger is not considered a significant business combination to Waste
Management under Regulation S-X of the Securities Exchange Act of 1934, as
amended.
7
<PAGE>
WASTE MANAGEMENT SUMMARY SELECTED SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------------- ------------------------
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...... $ 8,715,252 $ 9,581,570 $10,316,307 $10,874,767 $11,802,350 $ 5,655,002 $ 6,076,238
----------- ----------- ----------- ----------- ----------- ----------- -----------
Costs and expenses:
Operating (exclusive of
depreciation and
amortization shown
below)................ 5,236,872 5,635,536 6,176,196 6,468,204 7,359,572 3,501,928 3,623,266
General and
administrative........ 1,095,814 1,220,967 1,260,192 1,294,471 1,413,244 631,837 709,831
Depreciation and
amortization.......... 1,003,764 1,123,515 1,178,896 1,256,727 1,382,356 630,676 733,064
Merger costs........... -- 3,782 26,539 126,626 109,411 5,259 11,147
Asset impairments and
unusual items......... 556,448 42,833 394,092 529,768 1,771,145 73,467 --
(Income) loss from
continuing operations
held for sale, net of
minority interest...... (25,711) (24,143) (25,110) (315) 9,930 4,130 (2,570)
----------- ----------- ----------- ----------- ----------- ----------- -----------
7,867,187 8,002,490 9,010,805 9,675,481 12,045,658 4,847,297 5,074,738
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations............. 848,065 1,579,080 1,305,502 1,199,286 (243,308) 807,705 1,001,500
----------- ----------- ----------- ----------- ----------- ----------- -----------
Other income (expense):
Shareholder litigation
settlement and other
litigation related
costs................. (5,500) (79,400) -- -- -- -- --
Interest expense....... (362,113) (436,472) (533,474) (522,921) (551,149) (267,470) (325,962)
Interest income........ 45,366 47,878 41,565 34,603 45,214 26,179 13,653
Minority interest...... (34,939) (126,042) (81,367) (41,289) (45,442) (55,018) (38,166)
Other income, net...... 97,800 112,532 257,586 108,390 126,172 114,190 109,854
----------- ----------- ----------- ----------- ----------- ----------- -----------
(259,386) (481,504) (315,690) (421,217) (425,205) (182,119) (240,621)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations
before income taxes.... 588,679 1,097,576 989,812 778,069 (668,513) 625,586 760,879
Provision for income
taxes.................. 293,663 498,257 492,885 486,616 361,464 317,585 341,155
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations.. 295,016 599,319 496,927 291,453 (1,029,977) 308,001 419,724
Income (loss) from
discontinued
operations............. 19,886 27,324 4,863 (263,301) 95,688 8,208 --
Extraordinary item...... -- -- -- -- (6,809) -- (3,900)
Accounting change....... -- (1,281) -- -- (1,936) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)....... $ 314,902 $ 625,362 $ 501,790 $ 28,152 $ (943,034) $ 316,209 $ 415,824
=========== =========== =========== =========== =========== =========== ===========
Basic earnings (loss)
per common share:
Continuing operations.. $ 0.63 $ 1.26 $ 1.00 $ 0.55 $ (1.89) $ 0.57 $ 0.76
Discontinued
operations............ 0.04 0.05 0.01 (0.50) 0.17 0.01 --
Extraordinary item..... -- -- -- -- (0.01) -- (0.01)
Accounting change...... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)...... $ 0.67 $ 1.31 $ 1.01 $ 0.05 $ (1.73) $ 0.58 $ 0.75
=========== =========== =========== =========== =========== =========== ===========
Diluted earnings (loss)
per common share:
Continuing operations.. $ 0.63 $ 1.25 $ 0.99 $ 0.54 $ (1.89) $ 0.56 $ 0.74
Discontinued
operations............ 0.04 0.05 0.01 (0.49) 0.17 0.01 --
Extraordinary item..... -- -- -- -- (0.01) -- (0.01)
Accounting change...... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)...... $ 0.67 $ 1.30 $ 1.00 $ 0.05 $ (1.73) $ 0.57 $ 0.73
=========== =========== =========== =========== =========== =========== ===========
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital......... $ (195,100) $ (680,115) $(1,020,944) $ (249,081) $(1,960,163) $ (619,974) $(1,383,938)
Intangible assets, net.. 3,427,179 3,657,448 4,326,299 4,676,170 4,777,471 4,924,381 5,749,193
Total assets............ 17,233,089 18,076,776 19,897,707 20,667,198 19,962,481 21,288,676 22,018,962
Long-term debt,
including current
maturities............. 7,608,800 7,658,346 8,387,124 9,029,988 9,390,751 9,649,689 10,647,914
Stockholders' equity.... 4,218,751 4,494,737 5,172,432 5,194,772 3,805,260 5,164,942 4,996,685
</TABLE>
8
<PAGE>
EASTERN SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS ENDED JUNE
YEAR ENDED JUNE 30,(1) ENDED 30,
--------------------------------------------------------- DECEMBER 31, ----------------------
1993 1994 1995 1996 1997 1997 1997 1998
--------- ---------- ---------- ---------- ---------- ------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 8,684 $ 95,478 $ 116,468 $ 123,835 170,148 $ 119,526 $ 94,594 $ 132,753
Cost of revenues........ 4,049 69,819 85,549 96,030 122,701 80,787 64,659 81,959
Selling, general and
administrative
expenses............... 4,907 15,798 19,527 22,009 25,258 17,824 14,976 16,841
Depreciation and
amortization........... 1,809 6,375 7,596 7,470 9,455 7,523 5,312 10,017
Merger costs............ -- -- -- -- 3,337 2,725 1,480 3,816
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating (loss) income. (2,081) 3,486 3,796 (1,674) 9,397 10,666 8,167 20,120
Interest expense, net... (229) (1,474) (1,490) (2,420) (4,427) (2,113) (2,870) (1,933)
Other income (expense).. 123 994 187 255 1,044 306 412 472
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(Loss) income from
continuing operations
before income taxes.... (2,187) 3,006 2,493 (3,839) 6,014 8,959 5,709 18,659
Income tax (benefit)
expense................ (715) (24) 490 82 1,875 3,540 1,103 9,909
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net (loss) income from
continuing operations.. $ (1,472) $ 3,030 $ 2,033 $ (3,921) $ 4,139 $ 5,319 $ 4,606 $ 8,750
========= ========== ========== ========== ========== ========== ========== ==========
Basic (loss) earnings
per share from
continuing operations.. $ (.34) $ .25 $ .16 $ (.29) $ .23 $ .21 $ .24 $ .30
========= ========== ========== ========== ========== ========== ========== ==========
Weighted average number
of shares outstanding.. 4,392,022 12,322,795 12,330,822 13,504,543 18,251,457 25,452,560 19,065,147 28,820,261
========= ========== ========== ========== ========== ========== ========== ==========
Diluted (loss) earnings
per share from
continuing operations.. $ (.34) $ .24 $ .16 $ (.29) $ .22 $ .20 $ .23 $ .29
========= ========== ========== ========== ========== ========== ========== ==========
Weighted average number
of shares outstanding.. 4,392,022 12,494,096 12,423,430 13,504,543 19,215,150 26,999,497 20,254,246 30,333,763
========= ========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,(1)
------------------------------------------- DECEMBER 31, JUNE 30,
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- -------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital
(deficit).............. $ 2,199 $(1,698) $(6,149) $(9,128) $ (7,115) $ 2,646 $136,387
Total assets............ 16,792 47,898 52,719 60,327 193,943 285,539 518,413
Long-term debt and
capitalized leases,
less current portion... 1,994 19,014 16,910 25,012 78,949 68,342 48,772
Total liabilities....... 6,988 36,181 41,048 53,489 144,275 142,211 152,931
Total stockholders'
equity................. 9,804 11,717 11,671 6,838 49,668 143,328 365,482
</TABLE>
- -------
(1) Subsequent to June 30, 1996, Eastern acquired Super Kwik, Inc. and its
affiliates and Donno Company, Inc. and its affiliates and subsequent to
June 30, 1997, Eastern acquired Hamm's Sanitation. Inc. and H.S.S., Inc.,
and subsequent to December 31, 1997, Eastern acquired Bluegrass
Containment, Inc., Frank Stamato & Company and its affiliates, Ecology
Systems, Inc. and its affiliates, All Waste Systems, Inc. and its
affiliates, Ulster Sanitation, Inc. and its affiliates in separate
transactions. Each of these business combinations was accounted for as a
pooling of interests and, accordingly, Eastern's consolidated financial
statements were restated for periods prior to the acquisition to include
the results of operations, financial position and cash flows of those
companies. Financial data at June 30, 1993 and the year then ended
included above has not been restated to include these acquisitions.
9
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following table sets forth for the periods and as of the dates indicated
certain unaudited supplemental per share information of Waste Management and
certain unaudited historical per share information of Eastern. This information
should be read in conjunction with the supplemental and historical financial
information included elsewhere in this Proxy Statement/Prospectus and the
separate historical financial statements of Waste Management and Eastern
incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
------------------- JUNE 30,
1995 1996 1997 1998
----- ----- ------ ----------
<S> <C> <C> <C> <C>
SUPPLEMENTAL--WASTE MANAGEMENT
Basic earnings (loss) per common share:
Continuing operations......................... $1.00 $0.55 $(1.89) $ 0.76
Discontinued operations....................... 0.01 (0.50) 0.17 --
Extraordinary item............................ -- -- (0.01) (0.01)
Accounting change............................. -- -- -- --
----- ----- ------ ------
Net income (loss)............................. $1.01 $0.05 $(1.73) $ 0.75
===== ===== ====== ======
Diluted earnings (loss) per common share:
Continuing operations......................... $0.99 $0.54 $(1.89) $ 0.74
Discontinued operations....................... 0.01 (0.49) 0.17 --
Extraordinary item............................ -- -- (0.01) (0.01)
Accounting change............................. -- -- -- --
----- ----- ------ ------
Net income (loss)............................. $1.00 $0.05 $(1.73) $ 0.73
===== ===== ====== ======
Cash dividends per common share................ $0.59 $0.58 $ 0.57 $ 0.15
Book value per common share.................... $ 8.78
Tangible book value per common share........... $(1.32)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
------------------- DECEMBER 31, JUNE 30,
1995 1996 1997 1997 1998
----- ------ ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
HISTORICAL--EASTERN
Basic earnings (loss) per common
share............................ $0.16 $(0.29) $0.23 $0.21 $ 0.30
Diluted earnings (loss) per
common share..................... $0.16 $(0.29) $0.22 $0.20 $ 0.29
Cash dividends per common share... $0.22 $ 0.11 $0.04 $0.05 $ 0.03
Book value per common share....... $10.13
Tangible book value per common
share............................ $ 6.94
</TABLE>
10
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICES
The following table presents trading information for Waste Management common
stock and Eastern common stock on August 14, 1998 and September 28, 1998.
August 14, 1998 was the last full trading day prior to Waste Management's and
Eastern's announcement of the signing of the merger agreement. September 28,
1998 was the last practicable trading day for which information was available
prior to the date of this Proxy Statement/Prospectus. You should read the
information presented below in conjunction with "Market Price and Dividend
Information" on pages 47 and 48.
<TABLE>
<CAPTION>
WASTE
MANAGEMENT
WASTE COMMON STOCK
MANAGEMENT EASTERN PRICE X
COMMON STOCK COMMON STOCK 0.6406
(DOLLARS PER (DOLLARS PER (DOLLARS PER
SHARE) SHARE) SHARE)
------------- ------------- -------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
August 14, 1998....................... $53.88 $51.25 $35.00 $31.88 $34.52 $32.83
September 28, 1998....................
</TABLE>
On August 14, 1998, the last reported sale price per share of Waste
Management common stock on the New York Stock Exchange Composite Transaction
Tape was $52.69 and the last reported sale price per share of Eastern common
stock on the Nasdaq National Market was $32.00. On September 28, 1998, the last
reported sale price per share of Waste Management common stock on the New York
Stock Exchange Composite Transaction Tape was $[ ], and the last reported sale
price per share of Eastern common stock on the Nasdaq National Market was
$[ ].
The market prices of shares of Waste Management common stock and Eastern
common stock fluctuate. Because of this, we urge you to obtain current market
quotations. See "Risk Factors--Risks Relating to the Merger--Fixed Exchange
Ratio."
DIVIDENDS
Until September 15, 1998, neither Waste Management nor Eastern had ever
declared cash dividends on their respective common stock. However, certain
companies acquired by each of Waste Management and Eastern have declared
dividends. Because the pooling of interests method of accounting assumes that
the companies have been merged from inception and the historical financial
statements prior to the consummation of the acquisition or merger, as the case
may be, are restated as though the companies had been combined from inception,
each of Waste Management and Eastern are required to and do currently report
cash dividends per common share in their respective financial statements. On
September 15, 1998, Waste Management declared a cash dividend on its common
stock of $0.01 per share.
The decision whether to apply legally available funds to the payment of
dividends on Waste Management common stock will be made by the board of
directors of Waste Management from time to time in the exercise of its business
judgment.
11
<PAGE>
RISK FACTORS
You should consider the following risk factors, in addition to the other
information contained or incorporated by reference in this Proxy
Statement/Prospectus, in determining how to vote at the special meeting.
RISKS RELATING TO THE MERGER
Fixed Exchange Ratio. Upon consummation of the merger, each share of Eastern
common stock will be converted into the right to receive 0.6406 of a share of
Waste Management common stock. The exchange ratio is fixed and will not be
adjusted in the event of any increase or decrease in the price of either
Eastern common stock or Waste Management common stock. The market value of
Waste Management common stock and/or Eastern common stock at the effective
time of the merger may vary significantly from the price as of the date of
execution of the merger agreement, the date hereof or the date on which
stockholders vote on the merger due to, among other factors, market perception
of the synergies and cost savings expected to be achieved by the merger,
changes in the business, operations or prospects of Waste Management or
Eastern, market assessments of the likelihood that the merger will be
consummated and the timing thereof, and general market and economic
conditions. Because the exchange ratio will not be adjusted to reflect changes
in the relative market values of Waste Management common stock and Eastern
common stock, the relative market values of the Waste Management common stock
issued in the merger and the Eastern common stock surrendered in the merger
may be higher or lower than the relative market values of such shares at the
time the merger was negotiated or approved by stockholders.
Risks Related to the Waste Management Holdings Merger. Integrating the
operations and management of Waste Management (formerly known as USA Waste
Services, Inc.) and its wholly owned subsidiary, Waste Management Holdings,
Inc. (formerly known as Waste Management, Inc.), is a detailed, time-consuming
process. Management of Waste Management expects that annualized synergies and
cost savings of approximately $800 million pre-tax will be realized from the
Waste Management Holdings Merger; however, there can be no assurance that the
integration will result in the achievement of all of the anticipated synergies
and other benefits expected to be realized from the Waste Management Holdings
Merger or that this integration will occur without experiencing the loss of
key management personnel. In addition, Waste Management expects to incur
significant nonrecurring costs directly related to the Waste Management
Holdings Merger which will be included in operations of Waste Management
within the 12 months succeeding the Waste Management Holdings Merger.
In addition, Waste Management Holdings is the subject of a class action
litigation commenced prior to the Waste Management Holding's Merger related to
its accounting practices. It is not possible to predict the impact this
litigation may have on Waste Management, although it is reasonably possible
that the outcome may have a material adverse impact on its financial condition
or results of operations in one or more future periods. Waste Management
Holdings is also the subject of a formal investigation by the Securities and
Exchange Commission with respect to its previously filed financial statements
and accounting policies and procedures. Waste Management is unable to predict
the outcome or impact of this investigation at this time.
RISKS RELATING TO THE INDUSTRY
Competition. The waste management industry is highly competitive and
requires substantial capital resources. The industry consists of several large
national waste management companies, including Waste Management, as well as
numerous local and regional companies of varying sizes and financial
resources. Waste Management competes with numerous waste management companies
and with those counties and municipalities that maintain their own waste
collection and disposal operations. These counties and municipalities may have
financial competitive advantages due to the availability to them of tax
revenues and tax-exempt financing. In addition, competitors may reduce the
price of their services in an effort to expand sales volume or to win
competitively bid municipal contracts. Profitability may also be affected by
the increasing national emphasis on recycling, composting and other waste
reduction programs that could reduce the volume of solid waste collected or
deposited in landfills.
12
<PAGE>
Government Regulation. Each of Waste Management's and Eastern's operations
is, and Waste Management's will continue to be, subject to and substantially
affected by federal, state, local and foreign laws, regulations, orders and
permits which govern environmental protection, health and safety, zoning and
other matters. These laws, regulations, orders and permits may impose
restrictions on operations that could adversely affect Waste Management's
results of operations and financial condition, such as limitations on the
expansion of disposal facilities, limitations on or the banning of disposal of
out-of-state waste or certain categories of waste or mandates regarding the
disposal of solid or hazardous waste. In particular, each of Waste Management
and Eastern is subject to extensive and evolving environmental and land use
laws and regulations, which have become increasingly stringent. These laws and
regulations affect Waste Management's and Eastern's businesses in a variety of
ways. In order to develop and operate a landfill or other waste management
facility, it is necessary to obtain and maintain in effect various facility
permits and other governmental approvals, including those related to zoning,
environmental protection and land use. These permit approvals are difficult,
time consuming and costly to obtain and may be subject to community opposition
by government officials or citizens, regulatory delays, subsequent
modifications and other uncertainties. There can be no assurance that Waste
Management will be successful in obtaining and maintaining in effect permits
and approvals required for the successful operation and growth of its
business, including permits and approvals required for the development of
additional disposal capacity of landfills needed to replace existing capacity
as it is exhausted. The siting, design, operation and closure of landfills and
other disposal facilities are also subject to extensive regulations. These
regulations could require Waste Management to undertake investigatory or
remedial activities, to curtail operations or to close a landfill or other
disposal facility temporarily or permanently. Furthermore, future changes in
these regulations may require Waste Management to modify, supplement or
replace equipment or facilities at costs which could be substantial. In
addition, court decisions have ruled that state and local governments may not
constitutionally restrict the free movement of waste in interstate commerce
through the use of regulatory flow control laws. It is not possible to predict
what impact, if any, these decisions may have in the future on Waste
Management's or Eastern's disposal facilities.
Potential Environmental Liability Insurance. Waste Management may be subject
to liability for environmental damage that its landfills, transfer stations
and collection operations may have caused or may cause to its own properties
or to nearby landowners, particularly as a result of the contamination of
drinking water sources or soil, including damage resulting from conditions
existing prior to the acquisition of such assets or operations. Liability may
also arise from any off-site environmental contamination caused by pollutants
or hazardous substances, the transportation, treatment or disposal of which
was arranged for by Waste Management, Eastern or their predecessor owners of
operations or assets acquired by such companies. Any substantial liability for
such environmental impacts could have a material adverse effect on Waste
Management's financial position, results of operations or cash flows.
Waste Management and Eastern have established reserves in connection with
certain of their environmental remediation liabilities and liabilities for
closure and post-closure costs of disposal facilities owned or operated by
them. While such reserves have been established, new laws and the development
and discovery of new facts and conditions have required Waste Management and
Eastern, and in the future may require Waste Management, to establish reserves
for new remediation or closure/post-closure liabilities and to adjust reserves
for existing liabilities. Thus, there can be no assurance that the current
remediation and closure/post-closure reserves of Waste Management will
adequately cover all of such company's remediation and closure/post-closure
costs.
In the ordinary course of their businesses, Waste Management or Eastern may
become involved in a variety of legal and administrative proceedings relating
to land use and environmental laws and regulations. These may include the
following: proceedings by federal, state, local or foreign agencies seeking to
impose civil or criminal penalties on either company for violations of such
laws and regulations, or to impose liability on Waste Management or Eastern
under statutes, or to revoke, or deny renewal of, a permit; actions brought by
citizens' groups, adjacent landowners or governmental entities opposing the
issuance of a permit or approval to Waste Management or Eastern or alleging
violations of the permits pursuant to which Waste Management or Eastern
operates or laws or regulations to which Waste Management or Eastern is
subject; and actions seeking to impose
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liability on Waste Management or Eastern for any environmental impact at their
owned or operated facilities (or at facilities formerly owned or operated by
Waste Management or Eastern or its predecessors) or damage that those
facilities or other properties may have caused to adjacent landowners or
others, including groundwater or soil contamination. The adverse outcome of
one or more of these proceedings could have a material adverse effect on Waste
Management's financial position, results of operations or cash flows. Each of
Waste Management and Eastern has from time to time received, and expects that
Waste Management may in the future from time to time receive, citations or
notices from governmental authorities that its operations are not in
compliance with its permits or certain applicable environmental or land use
laws and regulations. Each of Waste Management and Eastern generally seeks to
work with the authorities to resolve the issues raised by such citations or
notices. There can be no assurance, however, that Waste Management will always
be successful in this regard, or that such future citations or notices will
not have a materially adverse effect on Waste Management's financial position,
results of operations or cash flows.
Waste Management's and Eastern's insurance for environmental liability is
very limited because Waste Management and Eastern believe that the cost for
such insurance is high relative to the coverage it would provide. Due to the
limited nature of such insurance coverage for environmental liability, if
Waste Management or Eastern were to incur liability for environmental damage,
such liability could have a material adverse effect on Waste Management's
financial position, results of operations or cash flows.
Alternatives to Landfill Disposal and Waste-to-Energy Facilities. During the
past several years, alternatives to landfill disposal and waste-to-energy
facilities, such as recycling and composting, have increasingly been utilized
by certain customers of Waste Management and Eastern. There also has been an
increasing trend at the state and local levels to mandate recycling and waste
reduction at the source and to prohibit the disposal of certain types of
wastes, such as yard wastes, at landfills or waste-to-energy facilities. These
developments may result in the volume of waste going to landfills and waste-
to-energy facilities being reduced in certain areas, which may affect Waste
Management's ability to operate its landfills and waste-to-energy facilities
at full capacity, the prices that can be charged for landfill disposal and
waste-to-energy services and the resulting operating margins.
Risks Generally Associated with Acquisitions. Waste Management has regularly
pursued opportunities to expand its services through the acquisition of
additional solid waste management businesses and operations that can be
effectively integrated with Waste Management's existing operations. In
addition, Waste Management regularly pursues mergers and acquisition
transactions, some of which are significant, in new markets where Waste
Management believes that it can successfully become a provider of integrated
solid waste management services. As one of the leading industry consolidators,
Waste Management could announce other transactions with either publicly or
privately owned businesses at any time. It is expected that Waste Management
will continue to seek acquisitions that complement its services, broaden its
customer base and improve its operating efficiencies. Such an acquisition
strategy involves certain potential risks associated with assessing, acquiring
and integrating the operations of acquired companies and identification and
management of potential risks associated with pre-existing liabilities of
acquired companies. Although Waste Management generally has been successful in
implementing its acquisition strategy, there can be no assurance that
attractive acquisition opportunities will continue to be available to Waste
Management, that Waste Management will have access to the capital required to
finance potential acquisitions on satisfactory terms or that any businesses
acquired will prove profitable. Future acquisitions may result in the
incurrence of additional indebtedness or the issuance of additional equity
securities which could dilute the ownership interests of then-existing
stockholders. Among the risks associated with acquisitions is the risk that
the acquired company has engaged in or is alleged to have engaged in conduct
prior to the date of acquisition that becomes the subject of civil or criminal
legal action after such date. There can be no assurance as to the outcome or
consequence of any investigations or matters related to such conduct,
including any effect on Waste Management's ability to retain or obtain
franchises or other business opportunities.
International Operations and Expansion. Waste Management's operations in
foreign countries generally will be subject to a number of risks inherent in
any business operating in foreign countries, including political,
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social and economic instability, general strikes, nationalization of assets,
currency restrictions and exchange rate fluctuations, nullification,
modification or renegotiation of contracts, and governmental regulation, all
of which are beyond the control of Waste Management and Eastern. No prediction
can be made as to how existing or future foreign governmental regulations in
any jurisdiction may affect Waste Management in particular or the solid waste
management industry in general.
Risks Related to Additional Financing. Waste Management may require
additional capital and letter of credit and bonding facilities from time to
time to pursue its acquisition strategy, fund internal growth and satisfy
customer and regulatory financial assurance requirements. A portion of Waste
Management's future capital requirements may be provided through future
issuances of debt or equity securities. There can be no assurance that Waste
Management will be successful in obtaining additional capital through
issuances of additional debt or equity securities or obtaining and maintaining
sufficient letter of credit and bonding facilities required for financial
assurance purposes.
Capitalized Expenditures. In accordance with generally accepted accounting
principles, Waste Management and Eastern capitalize certain expenditures and
advances relating to their acquisitions, pending acquisitions and landfill
development and expansion projects. Indirect acquisition costs, such as
executive salaries, general corporate overhead, public affairs and other
corporate services, are expensed as incurred. Waste Management's and Eastern's
policy is to charge against earnings any unamortized capitalized expenditures
and advances (net of any portion thereof that Waste Management or Eastern, as
the case may be, estimates will be recoverable, through sale or otherwise)
relating to any facility or operation that is permanently shut down, any
pending acquisition that is not consummated and any landfill development or
expansion project that is not successfully completed. There can be no
assurance that Waste Management in future periods will not be required to
incur a charge against earnings in accordance with such policy, which charge,
depending upon the magnitude thereof, could have a material adverse effect on
Waste Management's results of operations and financial condition.
Seasonality. Waste Management's and Eastern's respective operating revenues
tend to be somewhat lower in the winter months. This is generally reflected in
each company's first and fourth quarter results of operations. This is
primarily attributed to the fact that the volume of waste relating to
construction and demolition activities tends to increase in the spring and
summer months and the volume of residential waste in certain regions where
each company operates tends to decrease during the winter months.
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THE SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE
This Proxy Statement/Prospectus is being furnished by the board of directors
(the "Eastern Board") of Eastern Environmental Services, Inc. ("Eastern") to
holders of common stock, par value $0.01 per share, of Eastern ("Eastern
Common Stock") in connection with the solicitation of proxies by the Eastern
Board for use at the special meeting of Eastern stockholders (the "Special
Meeting") to be held on Thursday, November 5, 1998, at the Radisson Hotel Mt.
Laurel, 915 Route 73N, Mt. Laurel, New Jersey 08054, commencing at 10:00 a.m.,
local time, and at any adjournment or postponement thereof.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of Eastern on or about [Day], [Date].
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, holders of Eastern Common Stock will be asked (i) to
consider and vote upon a proposal to approve and adopt the Agreement and Plan
of Merger (the "Merger Agreement"), dated as of August 16, 1998, among Waste
Management, Ocho Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Waste Management ("Ocho Acquisition"), and Eastern and
(ii) such other matters as may properly be brought before the Special Meeting
or any adjournment or postponement thereof. Pursuant to the Merger Agreement,
Ocho Acquisition will be merged with and into Eastern (the "Merger") and each
share of Eastern Common Stock will be converted into the right to receive
0.6406 of a share (the "Exchange Ratio") of common stock, par value $0.01 per
share, of Waste Management ("Waste Management Common Stock"). Eastern will be
the surviving corporation (the "Surviving Corporation") as a wholly owned
subsidiary of Waste Management.
RECOMMENDATION OF THE EASTERN BOARD
The Eastern Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby, including the Merger, and recommends that
holders of Eastern Common Stock vote FOR approval and adoption of the Merger
Agreement.
STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED
The Eastern Board has fixed the close of business on September 25, 1998 as
the record date for the determination of the holders of Eastern Common Stock
entitled to notice of and to vote at the Special Meeting (the "Record Date").
Accordingly, only holders of record of Eastern Common Stock on the Record Date
will be entitled to notice of, and to vote at, the Special Meeting. As of the
Record Date, there were outstanding and entitled to vote [ ] shares
of Eastern Common Stock (constituting all of the voting stock of Eastern),
which shares were held by approximately [ ] holders of record. Each holder
of record of shares of Eastern Common Stock on the Record Date is entitled to
one vote per share, which may be cast either in person or by properly executed
proxy, at the Special Meeting. The presence, in person or by properly executed
proxy, of the holders of a majority of the outstanding shares of Eastern
Common Stock entitled to vote at the Special Meeting is necessary to
constitute a quorum at the Special Meeting.
The approval and the adoption of the Merger Agreement will require the
affirmative vote of the holders of a majority of the shares of Eastern Common
Stock outstanding on the Record Date.
Shares of Eastern Common Stock represented in person or by proxy will be
counted for the purpose of determining whether a quorum is present at the
Special Meeting. Shares which abstain from voting, and shares held by a broker
nominee in "street name" which indicates on a proxy that it does not have
discretionary authority to vote as to a particular matter, will be treated as
shares that are present and entitled to vote at the Special Meeting for
purposes of determining whether a quorum exists. Because the Merger Agreement
must be approved by the holders of a majority of the shares of Eastern Common
Stock outstanding on the Record Date, abstentions and broker non-votes will
have the same effect as a vote against the Merger Agreement.
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Louis D. Paolino, Jr. and five other current directors or executive officers
of Eastern who own an aggregate of [ ] shares of Eastern Common Stock,
representing [ ]% of the shares of Eastern Common Stock entitled to vote at
the Special Meeting, have entered into a stockholders agreement (the
"Stockholders Agreement") with Waste Management and Ocho Acquisition, whereby
they appointed Ocho Acquisition as their proxy to vote each of such shares in
favor of the adoption of the Merger Agreement and approval of the Merger and
against any transaction pursuant to an acquisition proposal or which could
result in any of the conditions of Eastern's obligations under the Merger
Agreement not being fulfilled. See "Stockholders Agreement." As of the Record
Date, current directors and executive officers of Eastern (including the six
directors or executive officers who are parties to the Stockholders Agreement)
and their affiliates may be deemed to be beneficial owners of approximately
[ ] shares of Eastern Common Stock, representing [ ]% of the shares
of Eastern Common Stock entitled to vote at the Special Meeting. Each of such
directors and executive officers of Eastern has advised Eastern that he or she
intends to vote all such shares in favor of the approval and adoption of the
Merger Agreement. See "The Companies--Eastern--Stock Ownership of Management."
In addition, Waste Management is the record owner of 655,000 shares of
Eastern Common Stock, representing approximately [ ]% of the shares of
Eastern Common Stock entitled to vote at the Special Meeting and will vote all
such shares in favor of the approval and adoption of the Merger Agreement.
PROXIES
This Proxy Statement/Prospectus is being furnished to Eastern stockholders
in connection with the solicitation of proxies by, and on behalf of, the
Eastern Board for use at the Special Meeting, and is accompanied by a form of
proxy.
All shares of Eastern Common Stock which are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, and not revoked, will be voted at such Special
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted for approval and adoption of the Merger Agreement.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, consideration of a motion to
adjourn such Special Meeting to another time and/or place (including, without
limitation, for the purposes of soliciting additional proxies or allowing
additional time for the satisfaction of conditions to the Merger), the persons
named in the enclosed forms of proxy and acting thereunder will have
discretion to vote on such matters in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Eastern, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to Eastern before the taking of the vote at the Special Meeting
or (iii) attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not, in and of itself, constitute a
revocation of the proxy). Any written notice of revocation or subsequent proxy
should be sent to Eastern Environmental Services, Inc., 1000 Crawford Place,
Suite 400, Mt. Laurel, New Jersey 08054, Attention: Secretary, or hand
delivered to the Secretary of Eastern at or before the taking of the vote at
the Special Meeting.
All expenses of Eastern's solicitation of proxies will be borne by Eastern,
and the cost of preparing and mailing this Proxy Statement/Prospectus to
Eastern stockholders will be paid one-half by Waste Management and one-half by
Eastern. In addition to solicitation by use of the mails, proxies may be
solicited from Eastern stockholders by directors, officers and employees of
Eastern in person or by telephone, telegram or other means of communication.
Such directors, officers and employees will not be additionally compensated,
but may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Eastern has retained Corporate Investor Communications,
Inc., a proxy solicitation firm, for assistance in connection with the
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solicitation of proxies for the Special Meeting at a cost of approximately
$6,500, plus reimbursement of reasonable out-of-pocket expenses. Arrangements
will also be made with brokerage houses, custodians, nominees and fiduciaries
for forwarding of proxy solicitation materials to beneficial owners of shares
held of record by such brokerage houses, custodians, nominees and fiduciaries,
and Eastern will reimburse such brokerage houses, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection therewith.
EASTERN STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
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THE MERGER
BACKGROUND OF THE MERGER
Since June of 1996, Eastern's primary business strategy to expand its
operations has been to consolidate private waste management companies in the
Eastern United States. The Eastern Board has also periodically evaluated
various strategic alternatives, including combinations of Eastern with both
larger and smaller public waste management companies.
Background. At various times during the fall of 1997, Eastern's management
discussed potential business combinations with four publicly traded waste
management companies but none of these discussions progressed beyond the
preliminary stages. In the fall of 1997, the Eastern Board also believed that
a business combination should not be aggressively pursued at that time as
Eastern could achieve greater increases in stockholder value through a
continuation of its acquisition of private waste management companies.
During the second calendar quarter of 1998, the Eastern Board directed
management to consider strategic possibilities that would enhance stockholder
value including exploring the possibilities of business combinations with
other waste management companies (i) that would expand the geographic scope of
Eastern's operations, (ii) that would increase the potential acquisition
candidates available to Eastern for further growth, (iii) that would
strengthen Eastern's management and other infrastructure, and (iv) that would
help protect Eastern's stock price against dramatic fluctuations and give
Eastern stockholders greater liquidity through larger trading volumes.
Management conferred informally from time-to-time with Salomon Smith Barney
("Salomon"), and evaluated the possible economic impact of various
combinations with such waste management companies.
Eastern's management again contacted the four companies with which it had
held discussions in 1997 and a fifth public waste company concerning possible
business combinations. Discussions with the companies occurred intermittently
from the second quarter through the third quarter of 1998, but again
discussions did not proceed beyond the preliminary stages. Members of
Eastern's management continued to talk occasionally with their counterparts at
the five companies but of the companies, only one company expressed any
further serious interest in a business combination with Eastern and Eastern
did not anticipate significant synergies would be achieved in such a business
combination.
During this period, Louis D. Paolino, Jr., the Chief Executive Officer of
Eastern also contacted USA Waste Services, Inc. (which subsequently changed
its name to Waste Management, Inc. as a result of the Waste Management
Holdings Merger on July 16, 1998) to discuss the possibility of a combination
of Eastern with USA Waste, but on each occasion, USA Waste indicated that it
was not interested in pursuing such a transaction at the time.
Commencement of Discussions with Allied Waste Services, Inc. ("Allied"). In
June 1998, Mr. Paolino was approached while attending an industry trade show
by an officer of Allied, regarding a possible merger. Throughout much of June
and July 1998, senior management of Eastern and Allied discussed the general
terms of a potential business combination while the two companies conducted
their respective due diligence reviews. On July 9, 1998, Eastern engaged
Salomon to render an opinion relating to the fairness to Eastern's
stockholders from a financial point of view of a potential business
combination with Allied.
On July 14 and July 15, 1998, the Eastern Board held special meetings to
review Eastern's business plans and the status of discussions with Allied. The
Eastern Board authorized Mr. Paolino and Eastern's General Counsel, Robert M.
Kramer, to continue negotiations with Allied.
From July 20, 1998 through August 10, 1998, senior management of Eastern and
Allied met on a number of occasions to discuss a potential business
combination, including the terms and conditions of a possible stock- for-stock
merger and due diligence issues. However, Eastern and Allied were unable to
reach agreement on the terms of a business combination, including a mutually
acceptable exchange ratio. Assuming that Eastern had agreed to the 1.3 to 1
exchange ratio that had been last proposed by Allied, and based upon the
closing price of
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Allied common stock on August 10, 1998, Eastern stockholders would have
received an amount of Allied common stock with a market value of $34.45 per
share of Eastern Common Stock. After the close of the market on August 10,
Allied announced a business combination with another publicly traded waste
management company and its stock price declined. In subsequent discussions
between Allied and Eastern, Allied indicated no willingness to improve the
proposed exchange ratio. Based upon such assumed exchange ratio and upon the
closing price of Allied common stock on August 14, 1998, Eastern stockholders
would have received an amount of Allied common stock with a market value of
$30.88 per share of Eastern Common Stock.
Waste Management. On August 10, 1998, Mr. Paolino contacted the Chief
Executive Officer of Waste Management, John E. Drury, and again advised that
Eastern would be willing to consider a transaction with Waste Management.
Given that Eastern's operations had changed significantly as a result of its
aggressive acquisition strategy and that Waste Management's own operations had
changed significantly as a result of the Waste Management Holdings Merger, Mr.
Drury advised Mr. Paolino that Mr. Drury would discuss with other members of
senior management whether it would be advantageous to consider a potential
business combination with Eastern. Mr. Drury and the Chief Financial Officer
of Waste Management, Earl E. DeFrates, and Eastern's management
representatives commenced discussions on August 11, 1998, continuing
throughout the following day. During the discussions the management teams
considered the possible benefits of a merger of Eastern and Waste Management,
including the potential synergies, cost savings and other benefits that might
result from such a transaction, and the exchange ratio at which it might be
accomplished. On August 11, 1998, Eastern provided financial and other due
diligence information to Waste Management. On August 12, Waste Management
retained outside counsel and a financial advisor to represent Waste Management
in connection with a possible transaction with Eastern. The parties made
arrangements for their financial, legal, and corporate representatives to
commence negotiations in New York on August 13, 1998. On August 13, 1998,
Eastern engaged Salomon to act as its financial advisor in its discussions
with Waste Management.
Between August 13 and 16, 1998, Mr. Paolino, Mr. Kramer and Eastern's legal
and financial advisers met and conferred by telephone with the legal and
financial advisers and the executive officers of Waste Management to exchange
due diligence information and negotiate the terms of the proposed merger,
including the exchange ratio, the break-up fee and other lock-up provisions to
be contained in the Merger Agreement, the terms and conditions on which
Eastern would be permitted to conduct its business pending the Merger, and the
conditions to closing. These negotiations continued until mid-day on August
16, 1998, when they were substantially concluded.
Eastern Board of Directors' Meetings. A special meeting of the Board of
Directors of Eastern was convened on the evening of August 14, 1998. At that
meeting, Mr. Paolino reported to the Board on the status of negotiations with
Allied and Waste Management and compared the forms of the proposed Agreements
and Plans of Merger presented to Eastern by each of Allied and Waste
Management.
Another special meeting of the Eastern Board was held on August 15, 1998. At
this meeting, counsel for Eastern reviewed in detail with the Board the
proposed agreement with Waste Management, including the provisions relating to
the Board's ability to consider alternative proposals if required by its
fiduciary duties to do so. Mr. Kramer discussed the antitrust and other
regulatory approvals that would be required for the Merger to be completed as
well as the likely timetable. The Board instructed Eastern's management to
continue to negotiate with Waste Management. At the conclusion of the meeting,
the Board scheduled a meeting for August 16, 1998, in New York.
On August 16, 1998, the Eastern Board met to consider the proposed business
combination with Waste Management. Mr. Paolino, Mr. Kramer and Eastern's legal
and financial advisers reviewed with the directors, among other things, the
background and merits of the proposed Waste Management and Allied transactions
and the values presented by the transactions, Eastern's position in the waste
management industry, the legal and economic terms of the Waste Management
agreement, and various regulatory and other legal issues relating to the Waste
Management transaction. Eastern's counsel advised the members of the Eastern
Board with respect to their fiduciary duties in connection with the proposed
transactions, and special antitrust counsel made a
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presentation to the Eastern Board regarding the regulatory aspects of the
proposed Waste Management transaction.
Two independent members of the Eastern Board then met separately with
outside counsel to Eastern, and reviewed the proposed management compensation
and severance arrangements for Mr. Paolino and Mr. Kramer with Waste
Management.
The meeting was then reconvened, and Salomon presented the Salomon Report
(as defined below) to the Eastern Board. See "--Opinion of Salomon Smith
Barney." Based on the foregoing, Salomon then delivered its oral opinion
(which was subsequently confirmed in writing) that as of such date, the
Exchange Ratio was fair to holders of Eastern Common Stock from a financial
point of view. Eastern did not request, and Salomon did not deliver, a
fairness opinion in connection with the potential business combination with
Allied.
Following these discussions and presentations, the Eastern Board considered
both proposals that had been presented to it. After detailed consideration of
a number of other factors, including, without limitation, those set forth
below under the caption "Reasons for Merger; Recommendation of the Eastern
Board," as well as the risks associated with the Merger, the Eastern Board
unanimously concluded that the interests of Eastern and its stockholders were
best served by proceeding with Waste Management. The Eastern Board unanimously
resolved to reject the Allied proposal and that it was advisable and in the
best interests of Eastern and its stockholders to enter into the Merger
Agreement.
Waste Management Board of Directors' Meeting. At a special meeting of the
Board of Directors of Waste Management convened on the evening of August 16,
1998, the Board of Waste Management unanimously (except for one director who
did not participate in the special meeting) voted to approve the Merger
Agreement.
Eastern and Waste Management finalized and executed the Merger Agreement
later that night. The transaction was announced publicly by the parties the
next morning.
REASONS FOR THE MERGER; RECOMMENDATION OF THE EASTERN BOARD
The Eastern Board has carefully considered the terms and conditions of the
proposed Merger and has unanimously determined that the Merger is in the best
interests of, and is on terms that are fair to Eastern's stockholders and has
unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Merger.
In reaching its unanimous determination to approve the Merger Agreement and
the transactions contemplated thereby, the Eastern Board considered a number
of factors, including without limitation, the following:
. Information relating to Eastern's prospects, which led the Eastern Board
to determine that it is reasonably likely that Eastern will be required
to make significant additional infrastructure investments if Eastern is
to attempt to produce stockholder value in excess of the Merger
Consideration;
. The Eastern Board's belief, with Salomon's concurrence, that Allied and
Waste Management were at that time the two most likely, and possibly
only, public companies that Eastern could negotiate a merger with on
acceptable terms and with an acceptable value to Eastern stockholders;
. That the Waste Management offer represented a premium of approximately
5.5% over the closing price of Eastern Common Stock on August 14, 1998
(the date on which the exchange ratio with Waste Management was
established) and premiums of approximately 17.3%, 13.2%, 6.4%, and 0.7%,
respectively, over the 120 day, 90 day, 60 day and 30 day average prices
of Eastern Common Stock, respectively;
. The opportunity for Eastern stockholders to participate in a larger,
better capitalized, and more geographically diversified company in a
transaction which is designed to be tax free and accounted for as a
pooling of interests;
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. The market capitalization, revenues and assets of Waste Management as
compared to Eastern;
. The experience, depth and competence of Waste Management's operating
team;
. The relative liquidity of an investment in Waste Management Common Stock
as compared to an investment in Eastern Common Stock;
. The anticipated synergies and benefits contemplated to be obtained in the
Merger;
. That Eastern may, subject to the Merger Agreement, terminate the Merger
Agreement in order to pursue a superior proposal if the Eastern Board
determines that it is required to do by its fiduciary duties to
stockholders of Eastern;
. That Eastern may, subject to the Merger Agreement, continue to acquire
businesses and assets pending the Merger thereby reducing the risk to
Eastern should the Merger not be consummated;
. That the amount of the break-up fee under the Merger Agreement was
reasonable in the judgment of the Eastern Board in light of the value of
the Merger Consideration to Eastern's stockholders and would not deter a
serious bidder;
. The analyses by Salomon and its opinion on August 16, 1998 to the effect
that, as of such date and based upon the assumptions and limitations
stated therein, the Exchange Ratio was fair to holders of Eastern Common
Stock from a financial point of view (see "--Opinion of Salomon Smith
Barney"); and
. The favorable environment for merger transactions in the United States
capital markets, which market conditions are subject to change.
In reaching its determination that the Merger was advisable and in the best
interest of Eastern and its stockholders, the Eastern Board also considered
and balanced against the potential benefits of the Merger a number of factors,
including without limitation, the factors set forth above under the caption
"Risk Factors," the likelihood of the Merger being approved by the appropriate
regulatory authorities, including the likelihood that obtaining such approvals
might be conditioned upon the agreement of Eastern to divest certain of its
operations, the risks that the Merger may not be consummated, the effect of
the public announcement of the Merger on the market price of Eastern Common
Stock, and the employment, severance and other arrangements between Eastern,
Waste Management and certain employees of Eastern. After detailed
consideration of these factors, the Eastern Board concluded that expected
long-term benefits of the Merger outweighed the potential risks associated
with the execution of the Merger Agreement.
The foregoing discussion and factors considered by the Eastern Board
addresses the material factors considered by the Eastern Board in its
consideration of the Merger. The Eastern Board did not quantify or attach any
particular weight to the various factors that it considered in reaching its
determination that the Merger Agreement and the transactions contemplated
thereby, including the Merger, are advisable and in the best interests of
Eastern's stockholders. Different Eastern Board members may have assigned
different weights to different factors. In reaching its determination, the
Eastern Board took the various factors into account collectively. The Eastern
Board did not perform factor-by-factor analysis, but rather its determination
was made in consideration of all of the factors as a whole.
OPINION OF SALOMON SMITH BARNEY
At the meeting of the Eastern Board held on August 16, 1998, Salomon
delivered its oral opinion, which opinion was subsequently confirmed in a
written opinion, dated as of August 16, 1998 (the "Salomon Opinion"), to the
effect that, as of such date, the Exchange Ratio was fair to holders of
Eastern Common Stock from a financial point of view.
HOLDERS OF EASTERN COMMON STOCK ARE URGED TO READ THE SALOMON OPINION IN ITS
ENTIRETY FOR INFORMATION WITH RESPECT TO THE PROCEDURES FOLLOWED, ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN BY SALOMON IN
RENDERING THE SALOMON OPINION. REFERENCES TO THE SALOMON OPINION
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HEREIN AND THE SUMMARY OF THE SALOMON OPINION SET FORTH BELOW ARE QUALIFIED IN
THEIR ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE SALOMON OPINION, WHICH IS
INCLUDED AS ANNEX B TO THIS PROXY STATEMENT/PROSPECTUS. THE SALOMON OPINION
DOES NOT CONSTITUTE A RECOMMENDATION CONCERNING HOW HOLDERS OF EASTERN COMMON
STOCK SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT.
In connection with rendering the Salomon Opinion, Salomon reviewed certain
publicly available information concerning Eastern and Waste Management and
certain other financial information concerning Eastern and Waste Management,
including financial forecasts, that were provided to Salomon by Eastern and
Waste Management, respectively. Salomon discussed the past and current
business operations, financial condition and prospects of Eastern and Waste
Management with certain officers and employees of Eastern and Waste
Management, respectively. Salomon also considered such other information,
financial studies, analyses, investigations and financial, economic and market
criteria that it deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon assumed
and relied upon the accuracy and completeness of the information reviewed by
it for purposes of the Salomon Opinion, and Salomon did not assume any
responsibility for independent verification of such information. With respect
to the financial forecasts of Eastern and Waste Management, Salomon was
advised by the respective managements of Eastern and Waste Management that
such forecasts were reasonably prepared on bases reflecting their best
currently available estimates and judgments, and Salomon expressed no opinion
with respect to such forecasts or the assumptions on which they were based.
Salomon did not assume any responsibility for any independent evaluation or
appraisal of any of the assets (including properties and facilities) or
liabilities of Eastern or Waste Management. Salomon was not asked to, and did
not, solicit other proposals to acquire Eastern. Salomon assumed that the
Merger would be accounted for as a pooling of interests in accordance with
generally accepted accounting principles as described in Accounting Principles
Board Opinion Number 16.
The Salomon Opinion is necessarily based upon conditions as they existed and
could be evaluated on the date of such opinion. The Salomon Opinion does not
imply any conclusion as to the likely trading range for Waste Management
Common Stock following the consummation of the Merger, which may vary
depending upon, among other factors, changes in interest rates, dividend
rates, market conditions, general economic conditions and other factors that
generally influence the price of securities. The Salomon Opinion does not
address Eastern's underlying business decision to effect the Merger and it
expresses no view on the effect on Eastern of the Merger and related
transactions. The Salomon Opinion is directed only to the fairness, from a
financial point of view, of the Exchange Ratio to holders of Eastern Common
Stock and does not constitute a recommendation concerning how holders of
Eastern Common Stock should vote with respect to the Merger Agreement.
The following is a summary of the report (the "Salomon Report") presented on
August 16, 1998, by Salomon to the Eastern Board in connection with the
rendering of its oral opinion:
Premium Analysis
Salomon noted that, based on the closing price on August 14, 1998 for Waste
Management Common Stock of $52.69, the Exchange Ratio represented an implied
price per share for Eastern Common Stock of $33.75. Based on this implied
price, Salomon reviewed the premium to Eastern stockholders represented in the
Merger based on the average 120 day, 90 day, 60 day and 30 day price and the
current price of Eastern Common Stock of $28.77, $29.82, $31.71, $33.51 and
$32.00, respectively. Salomon noted that the implied price per share
represented a premium of 17.3%, 13.2%, 6.4%, 0.7% and 5.5%, respectively.
Salomon further noted that such premiums were consistent with the premiums
realized by selling stockholders in precedent transactions. See "--Precedent
Transaction Review." Salomon also reviewed the premium to recent average
stockholder basis in the stock. Based on the percent of total volume traded at
specified prices over a 90 day, 60 day and 30 day period ending August 14,
1998, Salomon determined the weighted average price of Eastern Common Stock to
be approximately $30.07, $30.69 and $33.49, respectively. Salomon noted the
Exchange Ratio represented a premium to recent average stockholder basis in
the Eastern Common Stock.
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Implied Exchange Ratio
Salomon analyzed the implied historical exchange ratio between Eastern and
Waste Management from August 14, 1997 to August 12, 1998. Salomon noted that
the Exchange Ratio compared favorably to the recent relative trading histories
of the two companies.
Contribution Analysis
Salomon reviewed the relative contribution of sales, earnings before
interest, taxes, depreciation and amortization ("EBITDA"), earnings before
interest and taxes ("EBIT") and net income of Eastern and Waste Management to
the post-merger combined company in fiscal year 1998, fiscal year 1999 and
fiscal year 2000. The analysis was based on management forecasts throughout
the foregoing period. The Eastern contribution to the combined company
throughout the period ranged from 2.6% to 5.1% for sales, 2.4% to 4.0% for
EBITDA, 2.8% to 4.1% for EBIT and 3.6% to 4.2% for net income. Salomon noted
that the proposed transaction provided a pro forma equity ownership of 4.0%
for existing Eastern stockholders, which compared favorably with the relative
financial contributions of the companies.
Stock Price Performance
Salomon reviewed the relative price performance of Eastern Common Stock for
the period from February 13, 1998 to August 14, 1998, as compared to the
performance of Waste Management Common Stock and the S&P Industrial Average
(400 stocks). Salomon reviewed the price and volume history of Eastern Common
Stock for the period from May 1, 1996 to August 14, 1998 and Waste Management
Common Stock for the period from August 14, 1997 to August 14, 1998.
Liquidity Analysis
Salomon reviewed the average daily trading volume since January 1, 1998 of
Eastern Common Stock and Waste Management Common Stock and noted that Waste
Management trading volume was 4.98x Eastern trading volume. Accordingly,
Salomon noted that the stockholders of Eastern should benefit from an increase
in liquidity following the Merger.
Pro Forma Merger Consequences
Salomon analyzed certain pro forma effects of the Merger based upon the
Exchange Ratio, including the impact of the Merger on the projected earnings
per share ("EPS") of Waste Management for the fiscal years 1999 through 2002.
Such analyses were based on earnings estimates and projections provided by the
management of Eastern and Waste Management. Salomon noted that the Merger
would result in the following percentage accretion to the EPS of Waste
Management: 1.4% in fiscal year 1999, 1.4% in fiscal year 2000, 1.6% in fiscal
year 2001 and 1.6% in fiscal year 2002, in each case assuming projected
synergies were realized; (0.7)% in fiscal year 1999, (0.2)% in fiscal year
2000, 0.1% in fiscal year 2001 and 0.4% in fiscal year 2002, in each case
assuming no projected annual synergies were realized.
Stand-alone Valuation
Comparable Company Analysis. Salomon compared the financial and market
performance of Eastern with that of the following companies: Allied Waste
Industries, Inc., Browning-Ferris Industries, Inc., Republic Services, Inc.,
Waste Management, American Disposal Services, Inc., Casella Waste Systems,
Inc., Superior Services, Inc. and Waste Industries, Inc. For Eastern and each
of these companies, Salomon reviewed: (i) current stock prices, as of August
14, 1998, compared to the range of stock prices over a 52-week period; (ii)
multiples of market value to the last 12 months ("LTM") of net income ("LTM-
NI"); (iii) multiples of market value to estimated calendar year earnings per
share ("Cal-EPS") for 1998 and 1999; (iv) multiples of adjusted market value
("AMV") to LTM sales ("LTM-Sales"); (v) multiples of AMV to LTM earnings
before interest, taxes,
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depreciation and amortization ("LTM-EBITDA"); (vi) multiples of AMV to LTM
earnings before interest and taxes ("LTM-EBIT"); (vii) gross profit as a
percentage of LTM-Sales ("Gross Margin"); (viii) LTM-EBITDA as a percentage of
LTM-Sales ("EBITDA Margin"); (ix) LTM-EBIT as a percentage of LTM-Sales ("EBIT
Margin"); (x) LTM-NI as a percentage of LTM-Sales ("Net Margin"); (xi) implied
percentage growth in Cal-EPS from 1998 to 1999; (xii) projected five year
growth in EPS based on First Call estimates; (xiii) long-term debt as a
percentage of capitalization ("L-T Debt"); and (xiv) 1998 price/earnings
("P/E") ratios as a percentage of five year projected growth.
Salomon identified four companies that were the most comparable to Eastern
(American Disposal Services, Inc., Casella Waste Systems, Inc., Superior
Services, Inc. and Waste Industries, Inc. (collectively, the "Comparable
Companies")) and set forth a statistical summary based on these companies. The
statistical summary indicated for the Comparable Companies: (i) stock prices
with discounts ranging from 23% to 12% (median of 18%) from the high for a 52-
week price range and premiums ranging from 39% to 51% (median of 44%) from the
low for the same period, compared to Eastern stock prices with a 15% discount
from the high for a 52-week price range and a 75% premium to the low for the
same period; (ii) multiples of market value to LTM-NI ranging from 32.9x to
108.4x (median 46.1x), compared to an Eastern multiple of market value to LTM-
NI of 60.9x; (iii) multiples of market value to Cal-EPS ranging from 25.0x to
48.7x (median 30.9x) for 1998 and ranging from 20.0x to 33.0x (median 24.2x)
for 1999, compared to Eastern multiple of market value to Cal-EPS of 28.8x for
1998 and 20.3x for 1999; (iv) multiples of AMV to LTM-Sales ranging from 2.3x
to 5.2x (median 3.6x), compared to an Eastern multiple of AMV to LTM-Sales of
4.5x; (v) multiples of AMV to LTM-EBITDA ranging from 11.4x to 16.1x (median
12.5x), compared to an Eastern multiple of AMV to LTM-EBITDA of 21.9x; (vi)
multiples of AMV to LTM-EBIT ranging from 20.0x to 32.4x (median 26.3x),
compared to an Eastern multiple of AMV to LTM-EBIT of 28.4x; (vii) Gross
Margins ranging from 37.7% to 45.1% (median 42.9%), compared to an Eastern
Gross Margin of 35.2%; (viii) EBITDA Margins ranging from 20.5% to 32.5%
(median 29.4%), compared to an Eastern EBITDA Margin of 20.4%; (ix) EBIT
Margins ranging from 10.8% to 18.9% (median 13.8%), compared to an Eastern
EBIT Margin of 15.7%; (x) Net Margins ranging from 3.0% to 10.7% (median
7.6%), compared to an Eastern Net Margin of 7.9%; (xi) implied percentage
growth in Cal-EPS from 1998 to 1999 ranging from 25% to 47% (median 27%),
compared to Eastern implied percentage growth in Cal-EPS from 1998 to 1999 of
42%; (xii) five year projected EPS growth rates ranging from 24% to 30%
(median 25%), compared to an Eastern five year projected EPS growth rate of
29%; (xiii) L-T Debt ranging from 1% to 59% (median 13%), compared to an
Eastern L-T Debt of 13%; and (xiv) 1998 P/E as a percentage of five year
projected growth ranging from 100% to 195% (median 114%), compared to an
Eastern 1998 P/E as a percentage of five year projected growth of 100%.
Salomon used multiples of LTM revenues, LTM-EBITDA, LTM-EBIT and Cal-EPS of
comparable companies to arrive at estimated valuation ranges for Eastern and
Waste Management. The Eastern estimated valuation range based on comparable
companies was $26.00 to $34.00, the Waste Management estimated valuation range
based on comparable companies was $38.00 to $54.00.
Precedent Transaction Review. Salomon reviewed publicly available
information regarding twelve recent comparable industry acquisitions: the
pending acquisition by Allied Waste Industries, Inc. of American Disposal
Services, Inc. (1998); the acquisition by USA Waste Services, Inc. of Waste
Management Inc. (1998); the acquisition by USA Waste Services, Inc. of
American Waste Services (1998); the acquisition by USA Waste Services, Inc. of
Transamerican Waste Industries, Inc. (1998); the acquisition by USA Waste
Services, Inc. of United Waste Systems, Inc. (1997); the acquisition by USA
Waste Services, Inc. of Mid-American Waste Systems, Inc. (1997); the
acquisition by Republic Industries, Inc. of Continental Waste Industries, Inc.
(1996); the acquisition by Republic Industries of Addington Resources, Inc.
(1996); the acquisition by USA Waste Services, Inc. of Sanifill Inc. (1996);
the acquisition by USA Waste Services, Inc. of Western Waste Industries
(1995); the acquisition by USA Waste Services, Inc. of Chambers Development
Company, Inc. (1994); and the acquisition by USA Waste Services, Inc. of
Envirofil, Inc. (1994).
Salomon identified four precedent transactions that were the most comparable
to the Merger (the pending acquisition by Allied Waste Industries, Inc. of
American Disposal Services, Inc.; the acquisition by USA Waste Services, Inc.
of United Waste Systems, Inc.; the acquisition by USA Waste Services, Inc. of
Sanifill Inc.; and
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the acquisition by USA Waste Services, Inc. of Western Waste Industries) and
set forth a statistical summary based on these transactions. The statistical
summary indicated for the comparable transactions: (i) premiums to selling
stockholders ranging from (1.0)% to 16.2% (median of 7.7%); (ii) multiples of
purchase price to LTM tangible book value ranging from 3.0x to 11.6x (median
5.1x); (iii) multiples of purchase price to LTM cash flow ranging from 10.4x
to 24.4x (median 17.5x); (iv) multiples of transaction value to LTM revenue
ranging from 1.9x to 6.1x (median 5.4x); (v) transaction value as a multiple
of LTM -EBITDA ranging from 8.6x to 18.7x (median 15.6x); (vi) transaction
value as a multiple of LTM-EBIT ranging from 15.7x to 36.5x (median 24.4x);
and (vii) transaction value as multiple of total assets ranging from 1.7x to
2.1x (median 1.8x). Salomon used multiples of LTM revenues, LTM-EBITDA and
LTM-EBIT of precedent transactions to arrive at estimated valuation ranges for
Eastern and Waste Management. The Eastern estimated valuation range based on
precedent transactions was $26.00 to $34.00, the Waste Management estimated
valuation range based on precedent transactions was $39.00 to $59.00.
Discounted Cash Flow Analysis. Using a discounted cash flow ("DCF")
methodology, Salomon calculated the present value of the projected future cash
flows for each of Eastern and Waste Management without giving effect to the
Merger. The DCF analyses of both Waste Management and Eastern were based on
the annual projections of the respective managements of both companies through
the fiscal year 2002. In addition, Salomon analyzed a sensitivity case for
Eastern which reflected changes to the assumptions of Eastern management
regarding purchase price multiples of its projected acquisitions (the
"Sensitivity Case"). For each entity and under each case, Salomon aggregated
(x) the present value of the free cash flows over the applicable forecast
period with (y) the present value of the range of terminal values described
below. As part of the analysis, Salomon used discount rates ranging from 11.5%
to 13.5% for Eastern and 10.5% to 12.5% for Waste Management. The range of
terminal values were generally calculated by applying EBITDA multiples
(ranging from 7.0x to 9.0x for the EBITDA of each company) for the last year
of the forecast period. Salomon used the DCF analysis to arrive at estimated
valuation ranges of $36 to $46 per share of Eastern Common Stock, $31.00 to
$40.00 per share of Eastern Common Stock based on the Sensitivity Case and $47
to $64 per share of Waste Management Common Stock.
The preparation of a fairness opinion is not susceptible to a partial
analysis or summary description. Salomon believes that its analysis and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the process
underlying the analysis set forth in the Salomon Opinion and the Salomon
Report. The ranges of valuations resulting from any particular analysis
described above should not be taken to be the view of Salomon of the actual
value of Eastern or Waste Management.
In performing its analyses, Salomon made numerous assumptions with respect
to industry performance, general business, financial, market and economic
conditions and other matters, many of which are beyond the control of Eastern
and Waste Management. The analyses which Salomon performed are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than those suggested by such analyses.
Such analyses were prepared solely as part of Salomon's analysis of the
fairness, from a financial point of view, of the Exchange Ratio to Eastern
stockholders. These analyses do not purport to be an appraisal or to reflect
the prices at which a company might actually be sold or the prices at which
any securities may trade at the present time or at any time in the future.
In the ordinary course of its business, Salomon and its affiliates may
actively trade the securities of Eastern and Waste Management for their own
accounts and for the accounts of their customers and, accordingly, may at any
time hold a long or short position in such securities. In addition, Salomon
and its affiliates have previously rendered certain investment banking and
financial advisory services to Eastern and to Waste Management for which they
have received customary compensation. Salomon and its affiliates (including
Travelers Group Inc.) may have had other business relationships with Eastern
or Waste Management in the ordinary course of their businesses.
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Eastern retained Salomon to act as its financial advisor in connection with
the Merger and Salomon received a fee for its services of $2 million, $1
million of which became payable upon the initial delivery of the Salomon
Opinion and the remainder of which is contingent upon the consummation of the
Merger. Salomon is an internationally recognized investment banking firm that
provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon regularly engages in the
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and other
purposes. Eastern retained Salomon because of its reputation, expertise in the
valuation of companies and substantial experience in transactions such as the
Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Eastern Board regarding the
adoption of the Merger Agreement, Eastern stockholders should be aware of
interests which certain of the individuals who have served as directors or
executive officers of Eastern have in the Merger that are different from your
and their interests as stockholders generally.
Stock Options. As of the Record Date, approximately [ ] shares of Eastern
Common Stock were subject to options or warrants granted to executive officers
and directors under Eastern's equity-based compensation plans. Eastern's
compensatory stock option plans do not provide for the accelerated vesting of
Eastern options upon a change in control; however, the option agreements
evidencing the option grants to Eastern's executive officers (other than Louis
D. Paolino, Jr. and Robert M. Kramer) provide for accelerated vesting upon a
merger or other business combination of Eastern with another entity where
Eastern is not the surviving entity. Mr. Paolino's option agreement provides
for accelerated vesting of his options upon his no longer serving as President
and Chief Executive Officer of Eastern for any reason; Mr. Kramer's options
will automatically vest upon his termination of employment for any reason.
Pursuant to the Merger Agreement, Eastern will use commercially reasonable
efforts to ensure that all outstanding options to purchase Eastern Common
Stock, whether or not then vested and exercisable, will be canceled and each
optionee will receive a number of shares of Waste Management Common Stock
equal in market value, based on the average closing price of Waste Management
Common Stock on the New York Stock Exchange (the "NYSE") for the 10 trading
days immediately prior to the consummation of the Merger, to the fair value of
such options as determined by independent third party experts. Each option
that is not canceled as of the Effective Time will be assumed by Waste
Management and converted into appropriate number of options to purchase Waste
Management Common Stock, with corresponding adjustments to the exercise price
of such options. See "The Merger Agreement--Exchange and Cancellation of
Eastern Options."
Employment Agreements. Certain of the executive officers of Eastern are
parties to agreements that provide for the payment of change in control
bonuses upon the occurrence of a "change of control" of Eastern or in the
event of mergers or other transactions in which Eastern is not the surviving
corporation, as well as the payment of certain enhanced severance benefits in
the event of the termination of their employment with Eastern following the
occurrence of such events. In the event that the Merger triggers the payment
of the change in control bonuses under the agreements with all of the
executive officers described below and, if all of the executive officers'
employment were terminated under circumstances giving rise to the maximum
severance payments under such agreements, the aggregate amount of the change
in control bonuses and severance payments to be made under the agreements
would be approximately $19,250,000.
Louis D. Paolino, Jr. In consideration of the cancellation of his existing
employment arrangements with Eastern, Waste Management has agreed to enter
into an agreement with Mr. Paolino prior to the Effective Time (as defined
below) (the "Paolino Agreement"). The Paolino Agreement will provide for the
payment of an annual base salary of $500,000 in respect of services to be
rendered by him during the one-year transition period following the Effective
Time. In addition, the Paolino Agreement provides that Mr. Paolino will
receive a cash
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payment of $4.2 million at the Effective Time, as currently provided pursuant
to the terms of his existing employment agreement with Eastern. Mr. Paolino
will also receive payment in the aggregate amount of $1.4 million, in
cancellation of the remaining obligations under his existing employment
agreement with Eastern, through June 20, 2002, which is the remaining term of
his existing agreement. Waste Management has also agreed to purchase an
annuity in the amount of $6.2 million to provide payments for the remainder of
Mr. Paolino's life, and for the remainder of his children's life if Mr.
Paolino so requests, commencing on the termination of his active employment.
The Paolino Agreement will contain a non-competition covenant that will apply
for so long as any payments (including the annuity payments) remain to be made
thereunder.
Robert M. Kramer. In consideration of the cancellation of his existing
employment arrangement with Eastern, Waste Management has agreed to enter into
an agreement with Mr. Kramer prior to the Effective Time (the "Kramer
Agreement"). The Kramer Agreement will provide for the payment of an annual
base salary of $175,000 in respect of services to be rendered by him during
the one-year transition period following the Effective Time. In addition, the
Kramer Agreement also provides that Mr. Kramer will receive a cash payment of
$375,000 at the Effective Time, as currently provided pursuant to the terms of
his existing employment agreement with Eastern. Mr. Kramer will also receive
payment in the aggregate amount of $250,000, in cancellation of the remaining
obligations under his existing employment agreement with Eastern, through June
20, 2000, which is the remaining term of his existing agreement. Waste
Management has also agreed to purchase an annuity in the amount of $2.5
million to provide payments for the remainder of Mr. Kramer's life, and for
the remainder of his spouse's life if Mr. Kramer so requests, commencing on
the termination of his active employment. The Kramer Agreement will contain a
non-competition covenant that will apply for so long as any payments
(including the annuity payments) remain to be made thereunder.
Other Agreements with Executive Officers. Pursuant to their existing
employment agreements with Eastern, upon a merger, consolidation or other
business combination of Eastern with another entity where Eastern is not the
surviving entity (and, in the case of Mr. Grimm, if Louis D. Paolino, Jr. is
not the Chief Executive Officer or Chairman of the Board of the surviving
entity), the following executive officers will be entitled to change in
control bonuses, to be paid in cash or stock at Eastern's option, in the
following amounts: Dennis M. Grimm, Executive Vice President and Chief
Operating Officer--two years' salary; Terry Patrick, former Executive Vice
President and Chief Operating Officer (whose active employment ceased as of
December 1, 1997)--two times his annual salary plus the greater of (i)
$200,000 or (ii) two times the bonus he was paid by Eastern during the prior
twelve months; Matthew J. Paolino, Director--$200,000. The change in control
bonus under Matthew J. Paolino's employment agreement is also triggered in the
event that Louis D. Paolino, Jr. no longer serves as Chairman and Chief
Executive Officer of Eastern.
Gregory M. Krzemien's (Chief Financial Officer and Treasurer) existing
employment agreement provides that in the event of a "change in control," he
will receive a change in control bonus (to be paid in cash or stock at
Eastern's option) in an amount equal to two times the sum of his annual salary
plus any bonus paid to him during the preceding twelve months. Each of Willard
Miller, Executive Vice President, and Glen Miller, Executive Vice President,
are parties to employment agreements with Eastern that provide for the grant
of warrants that are convertible into 281,907 shares of Eastern Common Stock
and vest over the four-year period following the grant date, which warrants
will automatically become fully convertible following a "change in control."
Pursuant to their existing employment agreements with Eastern, in the event
that the following executive officers are terminated following a merger,
consolidation or other business combination of Eastern with another entity
where Eastern is not the surviving entity (and, in the case of Mr. Grimm, if
Louis D. Paolino, Jr. is not the Chief Executive Officer or Chairman of the
Board of the surviving entity), the following executive officers will be
entitled to severance payments in the following amounts: Dennis M. Grimm,
Executive Vice President and Chief Operating Officer--two years' salary; John
W. Poling, Vice President-Finance--one year's salary; Neal W. Rodrigue, Vice
President--Operations--$300,000, plus continued medical benefits for two
years; Matthew J. Paolino, Director--one year's salary, plus continued medical
benefits for two years. Matthew J. Paolino is
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entitled to these enhanced severance benefits in the event that Louis D.
Paolino, Jr. no longer serves as Chairman and Chief Executive Officer of
Eastern and in the event of his voluntary resignation following the occurrence
of either of such events.
In addition, in the event that either Glen Miller or Willard Miller resigns
within three months of a change in control, or if they are involuntarily
terminated following a merger in which the Company is not the surviving
entity, they will each receive a lump sum payment in an amount equal to two
years of their respective annual base salaries.
Indemnification. Pursuant to the Merger Agreement, the parties agreed that
the indemnification provisions of Eastern's Certificate of Incorporation, as
amended (the "Eastern Charter"), and Eastern's Bylaws, as amended (the
"Eastern Bylaws"), will not be amended or repealed for a period of six years
from consummation of the Merger. Waste Management and the Surviving
Corporation will indemnify each present and former director and officer of
Eastern against liabilities or expenses incurred in connection with claims
relating to matters occurring prior to the Effective Time (as defined herein)
and acts or omissions in connection with the Merger Agreement and the
transactions contemplated thereby. Waste Management has also agreed to assume
the indemnification agreements of Eastern with certain directors or officers
of Eastern. In addition, for six years following the consummation of the
Merger, Waste Management will cause the current policies (or policies
providing similar coverage) of directors' and officers' liability insurance
maintained by Eastern to remain in effect with respect to matters arising on
or prior to the Effective Time and acts or omissions in connection with the
Merger Agreement and the transactions contemplated thereby. See "The Merger
Agreement--Indemnification."
Stock Ownership. Louis D. Paolino, Jr. and five other current directors or
executive officers of Eastern who own an aggregate of [ ] shares of Eastern
Common Stock, representing [ ]% of the shares of Eastern Common Stock
entitled to vote at the Special Meeting, have entered into the Stockholders
Agreement with Waste Management and Ocho Acquisition, whereby they appointed
Ocho Acquisition as their proxy to vote each of such shares in favor of the
adoption of the Merger Agreement and approval of the Merger and against any
transaction pursuant to an acquisition proposal or which could result in any
of the conditions of Eastern's obligations under the Merger Agreement not
being fulfilled. See "Stockholders Agreement." As of the Record Date, current
directors and executive officers of Eastern (including the six directors or
executive officers who are parties to the Stockholders Agreement) and their
affiliates may be deemed to be beneficial owners of approximately [ ]
shares of Eastern Common Stock, representing [ ]% of the shares of Eastern
Common Stock outstanding as of the Record Date. Each of such directors and
executive officers of Eastern has advised Eastern that he or she intends to
vote all such shares in favor of the approval and adoption of the Merger
Agreement. See "The Companies--Eastern--Stock Ownership of Management."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the Merger to owners of Eastern Common Stock who hold the
stock as a capital asset (as defined in Section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code")). This summary is based on the Code,
Treasury regulations, administrative rulings and court decisions, all as in
effect as of the date hereof and all of which are subject to change at any
time (possibly with retroactive effect). This summary is not a complete
description of all the consequences of the Merger and, in particular, may not
address U.S. federal income tax considerations applicable to stockholders
subject to special treatment under U.S. federal income tax law (including, for
example, non-U.S. persons, financial institutions, dealers in securities,
insurance companies, tax-exempt entities and owners who hold Eastern Common
Stock as part of a hedge, straddle or conversion transaction). In addition, no
information is provided herein with respect to the tax consequences of the
Merger under applicable foreign, state or local laws. HOLDERS OF EASTERN
COMMON STOCK ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL INCOME AND OTHER TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE
EFFECTS OF STATE, LOCAL AND FOREIGN TAX LAWS.
The obligations of the parties to consummate the Merger are conditioned upon
the receipt by Waste Management of an opinion of counsel from Shearman &
Sterling, and the receipt by Eastern of an opinion of
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counsel from Drinker Biddle & Reath LLP (the "Tax Opinions"), in each case
subject to the qualifications discussed below, regarding the characterization
of the Merger as a "reorganization" within the meaning of Section 368(a) of
the Code, and certain U.S. federal income tax consequences related thereto. As
a reorganization, the Merger will have the following principal U.S. federal
income tax consequences:
. No gain or loss will be recognized by Waste Management, Ocho Acquisition
or Eastern as a result of the Merger;
. No gain or loss will be recognized by the holders of Eastern Common Stock
who exchange all of their Eastern Common Stock for Waste Management
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share of Waste Management Common Stock);
. The aggregate tax basis of the Waste Management Common Stock received in
the Merger by each holder of Eastern Common Stock will be the same as the
aggregate tax basis of the Eastern Common Stock surrendered in exchange
therefor (reduced by any amount of tax basis allocable to a fractional
share interest in Waste Management Common Stock for which cash is
received); and
. The holding period of Waste Management Common Stock received in the
Merger will include the holding period for the Eastern Common Stock
surrendered in exchange therefor.
Shearman & Sterling and Drinker Biddle & Reath LLP will render their Tax
Opinions on the basis of facts, representations and assumptions set forth or
referred to in the opinions which are intended to be consistent with the state
of facts existing at the time the Merger is consummated. In rendering its Tax
Opinion, each such counsel may require and rely upon representations and
covenants including those contained in certificates of officers of Waste
Management, Ocho Acquisition, Eastern and others, reasonably satisfactory in
form and substance to such counsel. The Tax Opinions will not be binding on
the Internal Revenue Service (the "IRS") or the courts, and the parties do not
intend to request a ruling from the IRS with respect to the Merger.
Accordingly, there can be no assurance that the IRS will not challenge the
conclusions of the Tax Opinions or that a court will not sustain such
challenge.
Cash received by a holder of Eastern Common Stock in lieu of a fractional
share of Waste Management Common Stock will be treated as received in
disposition of such a fractional share. An Eastern stockholder will generally
recognize capital gain or loss measured by the difference between the amount
of cash received and the portion of the tax basis of his or her Eastern Common
Stock allocable to the fractional share interest. In the case of individuals,
the maximum federal income tax rate applicable to capital gains generally is
(i) the same as ordinary income rates for capital assets held for one year or
less and (ii) 20% for capital assets held for more than one year.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests. The pooling of
interests method of accounting assumes that the combining companies have been
merged from inception, and the historical financial statements for periods
prior to consummation of the Merger may be restated as though the companies
had been combined from inception as required under United States generally
accepted accounting principles.
It is a condition to the Merger that (i) Waste Management shall have
received a letter from Arthur Andersen LLP, independent public accountants,
dated as of the date on which the transactions contemplated by the Merger
Agreement are consummated, to the effect that the Merger will qualify for
pooling of interests accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with the Merger
Agreement, and (ii) Waste Management and Eastern shall have received a letter
from Ernst & Young LLP, independent auditors for Eastern, regarding such
firm's concurrence with the conclusions of Eastern's management that no
conditions exist related to Eastern that would preclude Waste Management's
accounting for the Merger as a "pooling of interests," under Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance with
the Merger Agreement.
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REGULATORY APPROVALS
Hart-Scott-Rodino. The Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "DOJ") frequently
scrutinize the legality under the antitrust laws of transactions such as the
Merger. At any time before or after the Merger, the DOJ or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the Merger or seeking divestiture
of substantial assets of Waste Management or Eastern or their subsidiaries.
Private parties and state attorneys general may also bring an action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, of the result.
On August 24, 1998, Waste Management and Eastern filed Pre-Merger
Notification and Report Forms with the FTC and the DOJ under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). On
September 23, 1998, each of Waste Management and Eastern received a Request
for Additional Documents and Other Additional Information (a "Second Request")
with respect to the Merger. The time period for the DOJ to review the Merger
will terminate 20 days following substantial compliance by both Waste
Management and Eastern with the Second Request. Thereafter, the waiting period
may be extended only by court order or the consent of the parties. The HSR
Act, and the rules and regulations thereunder, provide that certain merger
transactions (including the Merger) may not be consummated until required
information and materials have been furnished to the DOJ and the FTC and
certain waiting periods have expired or been terminated.
Other. Consummation of the Merger is conditioned upon all material
governmental consents, approvals and authorizations legally required for the
consummation of the Merger and the transactions contemplated thereby having
been obtained and being in effect. In addition, certain state and local
governmental filings are required to be made in connection with the Merger.
Waste Management and Eastern expect that none of them would prohibit
consummation of the Merger. However, no assurance can be given that the
required consents, approvals or authorizations will be obtained.
In addition, Waste Management and Eastern have agreed to cooperate with each
other in obtaining the approvals referred to above. See "The Merger
Agreement--Cooperation."
FEDERAL SECURITIES LAWS CONSEQUENCES
All shares of Waste Management Common Stock received by Eastern stockholders
in the Merger will be freely transferable, except that shares of Waste
Management Common Stock received by persons who are deemed to be affiliates of
Eastern prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the
Securities Act of 1933, as amended (the "Securities Act") (or Rule 144
promulgated under the Securities Act in the case of such persons who become
affiliates of Waste Management) or otherwise in compliance with (or pursuant
to an exemption from) the registration requirements of the Securities Act.
Persons deemed to be affiliates of Eastern are those individuals or entities
that control, are controlled by, or are under common control with, Eastern and
generally include executive officers and directors of Eastern as well as
certain principal stockholders of Eastern. This Proxy Statement/Prospectus
does not cover any resales of Waste Management Common Stock received by
affiliates of Eastern in the Merger. As of September 25, 1998, other than
directors and officers of Eastern, there were no "affiliates" of Eastern.
STOCK EXCHANGE QUOTATION
It is a condition to the Merger that the shares of Waste Management Common
Stock to be issued pursuant to the Merger Agreement be approved for listing on
the NYSE, subject to official notice of issuance. An application will be filed
for listing the shares of Waste Management Common Stock to be issued in the
Merger on the NYSE. Following the Merger, Eastern Common Stock will no longer
be registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or traded on the Nasdaq National Market.
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NO APPRAISAL RIGHTS
Holders of Eastern Common Stock are not entitled to appraisal rights under
Section 262 of the Delaware General Corporation Law (the "DGCL") in connection
with the Merger because Eastern Common Stock was listed on the Nasdaq National
Market on the Record Date and the shares of Waste Management Common Stock to
be issued pursuant to the Merger will be listed on the NYSE at the Effective
Time.
CERTAIN LEGAL PROCEEDINGS
On August 18, 1998, a stockholder of Eastern filed a purported class action
suit in the Chancery Court of the State of Delaware in New Castle County
against Eastern and certain of its directors. The complaint alleges, among
other things, that (i) the merger consideration to be paid to the members of
the purported class is unfair and inadequate, (ii) the defendants have failed
to announce any active or open bidding procedures, inhibiting the maximization
of shareholder value, (iii) the defendants have breached their fiduciary
duties to the members of the class, and (iv) the members of the class will be
damaged and prevented from obtaining appropriate consideration for their
shares, to the irreparable harm of the class. The complaint seeks equitable
and injunctive relief that would enjoin or rescind the Merger, as the case may
be, unless Eastern adopts and implements a plan to obtain the highest possible
price for Eastern Common Stock, and would award the members of the class
appropriate damages and costs. Eastern believes the suit to be without merit
and intends to contest it vigorously.
THE MERGER AGREEMENT
The following summary of the terms of the Merger Agreement is qualified in
its entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Annex A. The Merger Agreement is hereby incorporated by reference
and made a part of this Proxy Statement/Prospectus. Stockholders of Eastern
are urged to read the Merger Agreement in its entirety for a more complete
description of the terms and conditions of the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger will be effective upon the filing of a Certificate of Merger with
the Secretary of State of the State of Delaware (the "Effective Time"). Such
filing of the Certificate of Merger shall be made simultaneously with, or as
soon as practicable after, the closing of the transactions contemplated by the
Merger Agreement. See "--Conditions to the Merger."
MANNER AND BASIS FOR CONVERTING SHARES
Upon consummation of the Merger, each outstanding share of Eastern Common
Stock (other than shares owned by Eastern as treasury stock or by Waste
Management or any wholly owned subsidiary of Waste Management, all of which
will be canceled) will be converted into the right to receive, without
interest, 0.6406 of a share of Waste Management Common Stock. In addition, at
the Effective Time, each issued and outstanding share of Ocho Acquisition
common stock, par value $0.01 per share, will be converted into one share of
common stock of the Surviving Corporation.
SHARE CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY STOCKHOLDERS OF
EASTERN PRIOR TO APPROVAL OF THE MERGER AND THE RECEIPT OF A LETTER OF
TRANSMITTAL.
No fractional shares of Waste Management Common Stock will be issued to any
Eastern stockholder upon surrender of certificates previously representing
Eastern Common Stock. As promptly as practicable following the Effective Time,
an exchange agent reasonably satisfactory to Waste Management and Eastern (the
"Exchange Agent") shall determine the excess of (i) the number of full shares
of Waste Management Common Stock delivered to the Exchange Agent by Waste
Management over (ii) the aggregate number of full shares of Waste Management
Common Stock to be distributed to holders of Eastern Common Stock (such excess
being called the "Excess Shares"). The Exchange Agent will sell the Excess
Shares at the then prevailing prices on
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the NYSE in accordance with the terms of the Merger Agreement and will hold
the proceeds in trust for the former holders of Eastern Common Stock. Waste
Management shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs of the Exchange Agent incurred in connection with such sale
or sales. The Exchange Agent will determine the portion of such net proceeds
to which each holder of Eastern Common Stock will be entitled, if any, by
multiplying the amount of the aggregate net proceeds by a fraction the
numerator of which is the amount of the fractional share interest to which
such holder of Eastern Common Stock is entitled (after taking into account all
shares of Eastern Common Stock then held by such holder) and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of certificates representing Eastern Common Stock are entitled.
Alternatively, Waste Management may elect, at its option exercised prior to
the Effective Time and in lieu of the issuance and sale of Excess Shares and
the making of the payments described above, to pay to the Exchange Agent an
amount in cash sufficient for the Exchange Agent to pay each holder of Eastern
Common Stock an amount in cash equal to the product obtained by multiplying
the fractional share interest to which such holder would otherwise be entitled
(after taking into account all shares of Eastern Common Stock held at the
Effective Time by such holder) by the closing price for a share of Waste
Management Common Stock on the NYSE on the first business day immediately
following the Effective Time.
No dividend or distribution with respect to Waste Management Common Stock
will be payable with respect to any fractional share and such fractional share
interests will not entitle their owners to any rights of a stockholder of
Waste Management.
Within five days after the Effective Time, the Exchange Agent will mail
transmittal forms and exchange instructions to each holder of record of
Eastern Common Stock to be used to surrender and exchange certificates
formerly evidencing shares of Eastern Common Stock for certificates evidencing
the shares of Waste Management Common Stock to which such holder has become
entitled. After receipt of such transmittal forms, each holder of certificates
formerly representing Eastern Common Stock will be able to surrender such
certificates to the Exchange Agent, and each such holder will receive in
exchange therefor certificates evidencing the number of whole shares of Waste
Management Common Stock to which such holder is entitled, any cash which may
be payable in lieu of a fractional share of Waste Management Common Stock and
any dividends or other distributions with respect to Waste Management Common
Stock with a record date after the Effective Time declared or made after the
Effective Time. EASTERN STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE A TRANSMITTAL FORM.
After the Effective Time, each certificate formerly representing Eastern
Common Stock, until so surrendered and exchanged, shall be deemed, for all
purposes, to evidence only the right to receive the number of whole shares of
Waste Management Common Stock which the holder of such certificate is entitled
to receive in the Merger, any cash payment in lieu of a fractional share of
Waste Management Common Stock and any dividend or other distribution with
respect to Waste Management Common Stock as described above. The holder of
such unexchanged certificate will not be entitled to receive any dividends or
other distributions payable by Waste Management until the certificate has been
exchanged. Subject to applicable laws, following surrender of such
certificates, such dividends and distributions, together with any cash payment
in lieu of a fractional share of Waste Management Common Stock, will be paid
without interest.
EXCHANGE AND CANCELLATION OF EASTERN OPTIONS
Pursuant to the Merger Agreement, Eastern shall use commercially reasonable
efforts to ensure that, at the Effective Time, all rights with respect to
Eastern Common Stock pursuant to each stock option (an "Eastern Option")
granted under stock option plans of Eastern or otherwise which is outstanding
at the Effective Time, whether or not the Eastern Options have previously
vested or become exercisable, will be canceled in exchange for a number of
shares of Waste Management Common Stock equal in market value (based upon the
average of the closing prices of Waste Management Common Stock on the NYSE for
the 10 trading days prior to the closing date of the Merger (the "Closing
Date") to the fair value of Eastern Options as determined by independent third
party experts, mutually agreed upon by Waste Management and Eastern. Waste
Management and Eastern have
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agreed that the value determined by using the methodology proposed by such
independent third party experts will represent the fair value of the Eastern
Options as of the Effective Time.
At the Effective Time, automatically and without any action on the part of
the holder thereof, each outstanding option that was not canceled shall be
assumed by Waste Management and shall become an option to purchase that number
of shares of Waste Management Common Stock obtained by multiplying the number
of shares of Eastern Common Stock issuable upon the exercise of such option by
the Exchange Ratio at an exercise price per share equal to the per share
exercise price of such option divided by the Exchange Ratio, and otherwise
upon the same terms and conditions as the outstanding Eastern Options;
provided, however, that in the case of any Eastern Option to which Section 421
of the Code applies by reason of the qualifications under Section 422 or 423
of the Code, the exercise price and the number of shares purchasable pursuant
to such Eastern Option shall be determined in order to comply with Section
424(a) of the Code.
Waste Management will take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Waste Management Common Stock for
delivery upon exercise of the Eastern Options assumed by Waste Management, if
any. As promptly as practicable after the Effective Time, Waste Management
will file a Registration Statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Waste Management Common Stock
subject to the Eastern Options and shall use its reasonable efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such Eastern Options remain outstanding.
Except as provided in the Merger Agreement or as otherwise agreed by Eastern
and Waste Management, each of Eastern's stock option plans providing for the
issuance or grant of Eastern Options will be assumed as of the Effective Time
by Waste Management with such amendments thereto as may be required to reflect
the Merger.
CONVERSION OF EASTERN WARRANTS
Pursuant to the Merger Agreement, each unexpired warrant to purchase Eastern
Common Stock that is outstanding at the Effective Time, whether or not
exercisable, will automatically be converted into a warrant to purchase a
number of shares of Waste Management Common Stock equal to the number of
shares of Eastern Common Stock that could be purchased under such warrant
multiplied by the Exchange Ratio, at a price per share of Waste Management
Common Stock equal to the per share exercise price of such warrant divided by
the Exchange Ratio.
CONDITIONS TO THE MERGER
Conditions to Each Party's Obligations to Consummate the Merger. The
respective obligations of Waste Management and Eastern to effect the Merger
are subject to the fulfillment of the following conditions at or prior to the
Closing Date:
. Stockholder Approval. The Merger Agreement and the transactions
contemplated thereby shall have been approved and adopted by the
requisite vote of the stockholders of Eastern under applicable law and
applicable listing requirements;
. Stock Exchange Listing. The shares of Waste Management Common Stock
issuable in the Merger and those to be reserved for issuance upon
exercise of stock options or warrants shall have been authorized for
listing on the NYSE;
. HSR Act. The waiting period applicable to consummation of the Merger
under the HSR Act shall have expired or been terminated;
. Effective Registration Statement. The Registration Statement on Form S-4
filed by Waste Management, of which this Proxy Statement/Prospectus is a
part, shall have become effective, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no
proceeding for that purpose shall have been instituted by the Securities
and Exchange Commission (the "Commission") or any state regulatory
authorities;
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. No Proceedings. No governmental order, writ, injunction or decree shall
be in effect that would make the Merger illegal or otherwise would
prohibit the consummation of the Merger;
. Other Consents and Approvals. All governmental waivers, consents, orders
and approvals legally required for the consummation of the Merger and the
transactions contemplated thereby shall have been obtained and be in
effect, except where the failure to obtain the same would not be
reasonably likely, individually or in the aggregate, to have a material
adverse effect on the business, operations, properties, assets,
liabilities, condition (financial or other) or results of operations of
Eastern and its subsidiaries, taken as a whole, following the Effective
Time; and
. Accountants' Letters. Arthur Andersen LLP, independent public accountants
for Waste Management, shall have delivered a letter, dated the Closing
Date, addressed to Waste Management, in form and substance reasonably
satisfactory to Waste Management, to the effect that the Merger will
qualify for "pooling of interests" accounting treatment if consummated in
accordance with the Merger Agreement and each of the parties to the
Merger Agreement shall have received a letter dated the Closing Date,
addressed to Eastern, from Ernst & Young LLP regarding such firm's
concurrence with Eastern's management's conclusions that no conditions
exist related to Eastern that would preclude Waste Management's
accounting for the Merger as a "pooling of interests" under Accounting
Principles Board Opinion No. 16, if closed and consummated in accordance
with the Merger Agreement.
Additional Conditions to the Obligations of Eastern. The obligation of
Eastern to effect the Merger is further subject to the fulfillment at or prior
to the Closing Date of the following additional conditions, unless waived by
Eastern:
. Performance of Obligations/Representations and Warranties. Waste
Management and Ocho Acquisition shall have performed their agreements in
the Merger Agreement required to be performed on or prior to the Closing
Date, and the representations and warranties of Waste Management and Ocho
Acquisition contained in the Merger Agreement shall be true and correct
in all material respects when made and (except to the extent that such
representations and warranties speak as of an earlier date) on and as of
the Closing Date as if made at and as of such date, and Eastern shall
have received a certificate of the Chairman of the Board and Chief
Executive Officer, the President or a Vice President of Waste Management
and of the President and Chief Executive Officer or a Vice President of
Ocho Acquisition to that effect; and
. Tax Opinion. Eastern shall have received an opinion of Drinker Biddle &
Reath LLP, in form and substance reasonably satisfactory to Eastern,
dated the Closing Date, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion, which
are consistent with the state of facts existing at the Effective Time:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) no gain or loss will be recognized by
Waste Management, Eastern or Ocho Acquisition as a result of the Merger,
and (iii) no gain or loss will be recognized by the holders of Eastern
Common Stock upon the exchange of their Eastern Common Stock solely for
shares of Waste Management Common Stock (except with respect to cash
received in lieu of fractional shares of Waste Management Common Stock)
(see "The Merger--Certain Federal Income Tax Consequences").
Additional Conditions to the Obligations of Waste Management and Ocho
Acquisition. The obligation of Waste Management and Ocho Acquisition to effect
the Merger is further subject to the fulfillment at or prior to the Effective
Time of the following additional conditions, unless waived by Waste Management
and Ocho Acquisition:
. Performance of Obligations/Representations and Warranties. Eastern shall
have performed its agreements in the Merger Agreement required to be
performed on or prior to the Closing Date, and the representations and
warranties of Eastern contained in the Merger Agreement shall be true and
correct in all material respects when made and (except to the extent that
such representations and warranties speak as of an earlier date) on and
as of the Closing Date as if made at and as of such date, and Waste
Management shall have received a certificate of the President and Chief
Executive Officer or of a Vice President of Eastern to that effect;
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. Tax Opinion. Waste Management shall have received an opinion of Shearman
& Sterling, in form and substance reasonably satisfactory to Waste
Management, dated the Closing Date, substantially to the effect that on
the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the
Effective Time: (i) the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code and (ii) Waste Management and
Ocho Acquisition will recognize no gain or loss for federal income tax
purposes as a result of consummation of the Merger (see "The Merger--
Certain Federal Income Tax Consequences"); and
. Consent of Lenders. All consents, approvals or waivers from Eastern's
lenders required to consummate the Merger, shall have been obtained and
be in effect at the Effective Time, except where the failure to obtain
the same would not be reasonably likely, individually or in the
aggregate, to have a material adverse effect on the business, operations,
properties, assets, liabilities, condition (financial or other) or
results of operations of Eastern and its subsidiaries, taken as a whole,
following the Effective Time.
COOPERATION
Pursuant to the Merger Agreement, each of the parties has agreed to take, or
to cause to be taken, all action and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement. In this regard, the Merger Agreement provides, among other things,
that Waste Management shall take all reasonable steps necessary to avoid or
eliminate impediments under any antitrust, competition or trade regulation law
that may be asserted by the FTC, the DOJ, any state Attorney General or any
governmental entity with respect to the Merger so as to enable consummation of
the Merger to occur as soon as reasonably possible. The Merger Agreement
further provides that, notwithstanding the foregoing, Waste Management will
propose, negotiate, commit to and effect, by consent decree, hold separate
order, or otherwise, the sale, divestiture, or disposition of such assets or
businesses of Waste Management or, effective as of the Effective Time, the
Surviving Corporation, as may be required in order to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding, which would otherwise have the effect
of preventing or delaying consummation of the Merger; provided, however, that
Waste Management will not be required to take any such actions if such action
would be reasonably likely, in the aggregate, to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of Eastern and its subsidiaries taken as a
whole, in the case of sale divestiture, holding separate or other disposition
of assets of Eastern or its subsidiaries, or, in the case of a sale,
divestiture, holding separate or other disposition of assets of Waste
Management or its subsidiaries, such action with respect to a comparable
amount of assets of Eastern would be reasonably likely, in the aggregate, to
have such a material adverse effect.
REPRESENTATIONS AND WARRANTIES OF WASTE MANAGEMENT AND EASTERN
The Merger Agreement contains various customary representations and
warranties of Eastern and Waste Management relating to, among other things,
(i) the due organization, valid existence and good standing of each of
Eastern, Waste Management and each of their respective subsidiaries and
certain similar corporate matters; (ii) the capitalization of Eastern and
Waste Management; (iii) the authorization, execution, delivery and
enforceability of the Merger Agreement, the required consents or approvals and
violations of any instruments or law caused by the Merger and certain other
related matters; (iv) the filing of SEC reports and the preparation of
financial statements; (v) the absence of any undisclosed liabilities; (vi) the
absence of certain material adverse changes or events; (vii) litigation;
(viii) this Registration/Proxy Statement; (ix) compliance with laws; (x) the
classification of the Merger as a reorganization under the Code and as a
"pooling of interests" transaction; and (xi) brokers and finders.
The Merger Agreement also contains customary representations and warranties
of Eastern relating to (i) compliance with its Certificate, Bylaws and
contractual arrangements; (ii) taxes; (iii) employee benefit matters; (iv)
labor controversies; (v) environmental matters; (vi) the absence of non-
competition agreements; (vii) title to
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assets; (viii) the required stockholder vote for the approval of the Merger;
and (ix) the opinion of a financial advisor. The Merger Agreement also
contains customary representations and warranties of Waste Management relating
to (i) the ownership by Waste Management of certain stock of Eastern and (ii)
Ocho Acquisition.
CONDUCT OF THE BUSINESS OF WASTE MANAGEMENT AND EASTERN PRIOR TO THE MERGER
Pursuant to the Merger Agreement, Eastern has agreed that, after the date of
the Merger Agreement and prior to the Closing Date or earlier termination of
the Merger Agreement, and except as otherwise agreed to in writing by Waste
Management and except as otherwise contemplated by or disclosed in the Merger
Agreement, it shall, and shall cause each of its subsidiaries to:
. conduct their respective businesses in the ordinary and usual course of
business and consistent with past practice;
. not (i) amend or propose to amend their respective charters or bylaws
(except that Eastern may amend its charter to increase the number of
authorized shares of Eastern Common Stock), (ii) split, combine or
reclassify their outstanding capital stock or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions to
Eastern by a wholly owned subsidiary of Eastern;
. not issue, sell, pledge or dispose of, or agree to issue, sell, pledge or
dispose of, any additional shares of, or any options, warrants or rights
of any kind to acquire any shares of their capital stock of any class or
any debt or equity securities convertible into or exchangeable for such
capital stock, except that (i) Eastern may issue shares upon exercise of
options and warrants, (ii) Eastern may issue shares of Eastern Common
Stock (or warrants or options to acquire up to an aggregate of 120,000
shares of Eastern Common Stock) in connection with acquisitions of assets
or businesses pursuant to the proviso set forth in the paragraph below,
(iii) Eastern may grant options (other than to any current executive
officer or director of Eastern) with an exercise price per share of
Eastern Common Stock no less than the closing price of a share of Eastern
Common Stock on the day prior to grant of such option with respect to up
to an aggregate of 100,000 shares of Eastern Common Stock; provided,
however, that such grants may only be made in the ordinary course of
business, to employees of Eastern and its subsidiaries consistent with
past practice, and (iv) after December 31, 1998, Eastern may issue
options to executive officers and directors in an amount consistent with
past practice and after delivery to Waste Management of a letter from
Ernst & Young LLP in a form reasonably satisfactory to Waste Management
to the effect that the issuance of such options would not prevent the
Merger from being treated as a "pooling of interests" for financial
accounting purposes;
. not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (a) borrowings in the ordinary
course of business (other than pursuant to credit facilities) or
borrowings under the existing credit facilities of Eastern or any of its
subsidiaries, (b) borrowings to refinance existing indebtedness on terms
which are reasonably acceptable to Waste Management, (c) assumption of
loans of certain leases of equipment in connection with acquisitions or
rollovers of certain leases of equipment in the ordinary course of
business consistent with past practice in amount or (d) borrowings in
connection with acquisitions as set forth in this paragraph, (ii) redeem,
purchase, acquire or offer to purchase or acquire any shares of its
capital stock or any options, warrants or rights to acquire any of its
capital stock, or any security convertible into or exchangeable for its
capital stock, (iii) take any action that would jeopardize the treatment
of the Merger as a pooling of interests under Accounting Principles Board
Opinion No. 16, (iv) take or fail to take any action which action or
failure to take action would cause Eastern or its stockholders (except to
the extent that any stockholders receive cash in lieu of fractional
shares and except to the extent of stockholders in special circumstances)
to recognize gain or loss for federal income tax purposes as a result of
the consummation of the Merger or would otherwise cause the Merger not to
qualify as a reorganization under Section 368(a) of the Code, (v) make
any acquisition of any assets or businesses other than expenditures for
current assets in the ordinary course of business and other than as set
forth in the proviso in (vii) below, (vi) sell, pledge,
37
<PAGE>
dispose of or encumber any material assets or business other than (a)
sales of businesses or assets in the ordinary course of business, (b)
sales of businesses or assets otherwise disclosed pursuant to the Merger
Agreement, (c) sales of businesses or assets with aggregate 1997 revenues
less than $5.0 million, and (d) pledges or encumbrances pursuant to
existing credit facilities or other permitted borrowings, or (vii) except
as set forth in the following proviso, enter into any binding contract,
agreement, commitment or arrangement with respect to any of the
foregoing; provided, however, that notwithstanding the foregoing (other
than subsections (iii) and (iv) of this paragraph), Eastern will not be
prohibited from acquiring any assets or businesses or incurring or
assuming indebtedness in connection with acquisitions of assets or
businesses so long as (a) such acquisitions are otherwise disclosed in
the Merger Agreement, or (b) the aggregate revenue projected to be earned
from acquisitions (other than those acquisitions disclosed in the Merger
Agreement) for the twelve months following each acquisition does not
exceed $150 million prior to December 31, 1998 or $250 million
thereafter, and the aggregate value of consideration paid or payable for
any one such acquisition (other than those acquisitions disclosed in the
Merger Agreement), including any funded indebtedness assumed and any
Eastern Common Stock issued in connection with such acquisition (valued
for purposes of this limitation at a price per share equal to the price
of the Eastern Common Stock on the date the agreement in respect of such
acquisition is entered into) does not exceed $60 million;
. use all reasonable efforts to preserve intact their respective business
organizations and goodwill, keep available the service of their
respective present officers and key employees, preserve the goodwill and
business relationships with customers and others having business
relationships with them;
. subject to restrictions imposed by applicable law, confer with one or
more representatives of Waste Management to report operational matters of
materiality and the general status of ongoing operations;
. not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice;
provided, however, that Eastern and its subsidiaries shall in no event
enter into or amend any written employment agreement providing for annual
base salary in excess of $75,000 per annum, except for employment
agreements entered into with the sellers of businesses acquired in
accordance with the Merger Agreement;
. not adopt, enter into or amend any pension or retirement plan, trust or
fund, except as required to comply with changes in applicable law and not
adopt, enter into or amend in any material respect any bonus, profit
sharing, compensation, stock option, deferred compensation, health care,
employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employees or retirees
generally, other than in the ordinary course of business, except as
contemplated above and in certain other limited circumstances;
. use commercially reasonable efforts to maintain with financially
responsible insurance companies on its tangible assets and its businesses
in such amounts and against such risks and losses as are consistent with
past practice;
. not make, change or revoke any material tax election or make any material
agreement or settlement regarding taxes with any taxing authority; and
. not change its accounting principles or practices other than as required
by United States generally accepted accounting principles.
Notwithstanding the foregoing, Eastern will not (i) acquire or agree to
acquire any assets or businesses if such acquisition or agreement may
reasonably be expected to delay the consummation of the Merger, (ii) acquire
or agree to acquire any assets or businesses if such assets or businesses are
not in industries in which Eastern currently operates, unless such assets or
businesses are acquired incidental to an acquisition of businesses or assets
that are in industries in which Eastern currently operates and it is
reasonable to acquire such incidental
38
<PAGE>
businesses or assets, or (iii) acquire or agree to acquire all or
substantially all of the business, assets or properties or capital stock of
any entity with securities registered under the Securities Act or the Exchange
Act.
Pursuant to the Merger Agreement, Waste Management has agreed that, after
the date of the Merger Agreement and prior to the Closing Date or earlier
termination of the Merger Agreement, and except as otherwise agreed to in
writing by Eastern, it shall, and shall cause each of its subsidiaries to:
. conduct their respective businesses in the ordinary and usual course of
business and consistent with past practice;
. not (i) amend or propose to amend their respective charters (except for
any amendments by Waste Management of its Certificate of Incorporation to
increase the number of authorized shares of Waste Management Common Stock
so as to be able to consummate the Merger) or Bylaws, (ii) split, combine
or reclassify (whether by stock dividend or otherwise) their outstanding
capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for
the payment of quarterly cash dividends or dividends or distributions to
Waste Management by a wholly owned subsidiary of Waste Management;
. not (i) take any action that would jeopardize the treatment of the Merger
as a pooling of interests under APB No. 16, or (ii) take or fail to take
any action which action or failure to take action would cause Waste
Management or its stockholders to recognize gain or loss for federal
income tax purposes as a result of the consummation of the Merger or
would otherwise cause the Merger not to qualify as a reorganization under
Section 368(a) of the Code;
. not intentionally delist Waste Management Common Stock from trading on
the NYSE; and
. not change its accounting principles or practices other than as required
by United States generally accepted accounting principles.
NO SOLICITATION OF ACQUISITION TRANSACTIONS
The Merger Agreement provides that after the date of the Merger Agreement
and prior to the Effective Time or earlier termination of the Merger
Agreement, Eastern shall not, and shall not permit any of its subsidiaries to,
initiate, solicit, negotiate, encourage or provide confidential information to
facilitate, and Eastern shall not, and shall use its reasonable efforts to
cause any officer, director or employee of Eastern, or any attorney,
accountant, investment banker, financial advisor or any other agent retained
by it or any of its subsidiaries not to, initiate, solicit, negotiate,
encourage or provide non-public or confidential information to facilitate any
proposal or offer to acquire all or any substantial part of the business or
properties of Eastern or any capital stock of Eastern, other than as permitted
in accordance with the conduct of business covenant of Eastern (any such
transaction referred to as an "Acquisition Transaction"); provided, however,
that (i) Eastern may, in response to a potential or proposed Acquisition
Transaction ("Acquisition Proposal") which the Eastern Board determines, in
good faith and after consultation with its independent financial advisor,
could result in an Acquisition Transaction more favorable to Eastern's
stockholders (any such offer or proposal referred to as a "Superior
Proposal"), furnish (subject to the execution of a confidentiality agreement
substantially similar to the confidentiality provisions of the Merger
Agreement), confidential or non-public information to a potential acquirer and
negotiate with such potential acquirer if the Eastern Board, after consulting
with its outside legal counsel, determines in good faith that the failure to
provide such confidential or non-public information to or negotiate with such
potential acquirer would be reasonably likely to constitute a breach of its
fiduciary duty to its stockholders and (ii) the Eastern Board may take and
disclose to Eastern's stockholders a position contemplated by Rule 14e-2 under
the Exchange Act. The Merger Agreement requires that Eastern promptly (but in
any event within 48 hours) notify Waste Management after receipt of any
Acquisition Proposal, indication of interest or request for non-public
information relating to Eastern or its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of
Eastern or any subsidiary by any person or entity that informs the Eastern
Board or the board of directors of such subsidiary that it is considering
making, or has made, an
39
<PAGE>
Acquisition Proposal. Such notice to Waste Management shall be made orally and
in writing and shall indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or contact.
CONDUCT OF THE BUSINESS OF THE COMBINED COMPANIES FOLLOWING THE MERGER
Following the Merger, Eastern will be a wholly owned subsidiary of Waste
Management. Pursuant to the Merger Agreement, the Eastern Charter, as in
effect immediately prior to the Effective Time, shall be amended (except for
provision of the Eastern Charter relative to the name of Eastern) as of the
Effective Time to be identical to the Certificate of Incorporation of Ocho
Corporation and shall be the Certificate of Incorporation of the Surviving
Corporation and thereafter may be amended in accordance with their terms as
provided in the DGCL, except that no amendment shall be made to, nor shall any
provision be included which is inconsistent with, the provision of the Eastern
Charter relating to the indemnification of directors and officers and the
elimination of personal liability of directors for breach of fiduciary duty to
the fullest extent permitted by the DGCL. Pursuant to the Merger Agreement,
the Bylaws of Ocho Acquisition as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation.
TERMINATION OR AMENDMENT
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after the approval by the stockholders of Eastern, by
the mutual written consent of Eastern and Waste Management or as follows:
. (i) by either Waste Management or Eastern (a) if the Merger is not
completed by March 31, 1999 (the "Termination Date") (unless due to a
delay or default on the part of the terminating party), (b) upon a
material breach of a representation or warranty of the non-terminating
party contained in the Merger Agreement which has not been cured in all
material respects and which has caused certain conditions to the
obligations of the terminating party to effect the Merger to be incapable
of being satisfied by the Termination Date, (c) if the Merger is enjoined
by a final, unappealable court order not entered at the request or with
the support of the terminating party and if the terminating party shall
have used reasonable efforts to prevent the entry of such order, or (d)
if the non-terminating party (I) fails to perform in any material respect
any of its material covenants in the Merger Agreement and (II) does not
cure such default in all material respects within 30 days after written
notice of such default specifying such default in reasonable detail is
given to the non-terminating party by the terminating party;
. (ii) by Eastern (a) if Eastern receives a Superior Proposal, resolves to
accept such Superior Proposal, and has given Waste Management two days'
prior written notice of its intention to terminate pursuant to such
provision (provided that such termination shall not be effective until
such time as any termination fees required to be paid by Eastern pursuant
to the Merger Agreement have been received by Waste Management) or (b) if
(I) a tender or exchange offer is commenced by a potential acquirer
(excluding any affiliate of Eastern or any group of which any affiliate
of Eastern is a member) for all outstanding shares of Eastern Common
Stock, (II) the Eastern Board determines, in good faith and after
consultation with an independent financial advisor, that such offer
constitutes a Superior Proposal and resolves to accept such Superior
Proposal or recommend to the stockholders that they tender their shares
in such tender or exchange offer and (III) Eastern shall have given Waste
Management two days' prior written notice of its intention to terminate
(provided that such termination shall not be effective until such time as
any termination fees required to be paid by Eastern pursuant to the
Merger Agreement have been received by Waste Management); and
. (iii) by Waste Management (a) if the Eastern Board shall have resolved to
accept a Superior Proposal or shall have recommended to the stockholders
of Eastern that they tender their shares in a tender or exchange offer
commenced by a third party (excluding any affiliate of Waste Management
or any group of which any affiliate of Waste Management is a member) or
(b) if the stockholders of Eastern fail to approve the Merger at a duly
held meeting of stockholders called for such purpose or any adjournment
40
<PAGE>
or postponement thereof. In the event of termination of the Merger
Agreement pursuant to its terms by either Waste Management or Eastern,
the Merger Agreement shall forthwith become void and there shall be no
liability or further obligation on the part of Eastern, Waste Management,
Ocho Acquisition or their respective officers or directors (except for
certain obligations of the parties regarding confidential information,
return of non-public information following termination, expenses and fees
payable in connection with the Merger Agreement and/or the termination
thereof, assignment of the Merger Agreement and the governing law
applicable to the Merger Agreement, all of which shall survive the
termination).
The Merger Agreement may not be amended except by action taken by the
parties' respective boards of directors or duly authorized committees thereof
and then only by an instrument in writing signed on behalf of each party and
in compliance with applicable law. Such amendment may take place at any time
prior to the Closing Date, and, subject to applicable law, whether before or
after approval by the stockholders of Eastern, Waste Management or Ocho
Acquisition.
TERMINATION FEES
Eastern has agreed to pay a termination fee to Waste Management equal to $35
million if (i) Eastern terminates the Merger Agreement pursuant to clauses
(ii)(a) or (ii)(b) of "--Termination or Amendment" above, (ii) Waste
Management terminates the Merger Agreement as described in clause (iii)(a) of
"--Termination or Amendment" above or (iii) (a) Waste Management terminates
the Merger Agreement pursuant to clause (iii)(b) of "--Termination or
Amendment" above; (b) prior to the time of such termination a proposal
relating to an Acquisition Transaction had been made; and (c) on or prior to
the six month anniversary of the termination of the Merger Agreement, Eastern
or any of its subsidiaries or affiliates (x) enters into an agreement or
letter of intent (or if the Eastern Board resolves or announces an intention
to do) with respect to any Business Combination with any person, entity or
group or (y) consummates any Business Combination with any person, entity or
group. "Business Combination" means (i) a merger, consolidation, share
exchange, business combination or similar transaction involving Eastern as a
result of which Eastern's stockholders prior to such transaction in the
aggregate cease to own at least 70% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof), (ii) a sale, lease, exchange, transfer or other disposition of more
than 30% of the assets of Eastern and its subsidiaries, taken as a whole, in a
single transaction or a series of related transactions, or (iii) the
acquisition, by a person (other than Waste Management or any affiliate
thereof), group or entity of beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) of more than 30% of Eastern Common Stock whether by
tender or exchange offer or otherwise.
EXPENSES
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing this Proxy
Statement/Prospectus shall be shared equally by Waste Management and Eastern.
INDEMNIFICATION
The Merger Agreement provides that the indemnification provisions of the
Certificate of Incorporation and Bylaws of the Surviving Corporation as in
effect at the Effective Time shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the
Effective Time were directors, officers, employees or agents of Eastern. The
Merger Agreement further provides that Waste Management will assume, be
jointly and severally liable for, and honor, and will cause the Surviving
Corporation to honor, in accordance with their respective terms, each of the
indemnification agreements listed in the Merger Agreement.
41
<PAGE>
The Merger Agreement also provides that, after the Effective Time, each of
Waste Management and the Surviving Corporation will, to the fullest extent
permitted under applicable law, indemnify and hold harmless each present and
former director, officer, employee and agent of Eastern or any of its
subsidiaries (each, together with such person's heirs, executors or
administrators, an "indemnified Party" and, collectively, the "indemnified
Parties") against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with any action or
omission occurring or alleged to occur prior to the Effective Time (including,
without limitation, acts or omissions in connection with such persons serving
as an officer, director or other fiduciary in any entity if such service was
at the request or for the benefit of Eastern) or arising out of or pertaining
to the transactions contemplated by the Merger Agreement.
In the event of any such actual or threatened claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) Eastern or Waste Management and the Surviving Corporation, as the
case may be, will pay the reasonable fees and expenses of counsel selected by
the indemnified Parties, which counsel will be reasonably satisfactory to
Waste Management and the Surviving Corporation, and will pay all other
reasonable expenses in advance of the final disposition of such action, (ii)
Waste Management and the Surviving Corporation will cooperate and use all
reasonable efforts to assist in the vigorous defense of any such matter, and
(iii) to the extent any determination is required to be made with respect to
whether an indemnified Party's conduct complies with the standards set forth
under the DGCL and Waste Management's or the Surviving Corporation's
respective charters or bylaws, such determination must be made by independent
legal counsel acceptable to Waste Management or the Surviving Corporation, as
the case may be, and the indemnified Party; provided, however, that neither
Waste Management nor the Surviving Corporation will be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld) and, provided further, that any amounts paid to any
indemnified Party will be repaid to Waste Management or the Surviving
Corporation if it is later determined by a court of competent jurisdiction
that such person was not entitled to be indemnified under the Merger
Agreement.
In the event the Surviving Corporation or Waste Management or any of their
successors or assigns (i) consolidates with or merges into any other person
and is not the surviving corporation of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation or Waste Management will
assume the indemnification obligations of the Surviving Corporation or Waste
Management, as the case may be, set forth in the Merger Agreement.
The Merger Agreement requires that for a period of six years after the
Effective Time, Waste Management will provide, without any lapse in coverage,
directors' and officers' liability insurance protection of the same kind and
scope as that maintained by Eastern and its subsidiaries with respect to
matters arising on or before the Effective Time and acts or omissions in
connection with the Merger Agreement and the consummation of the transactions
contemplated thereunder. Waste Management will pay all reasonable expenses,
including reasonable attorneys' fees, that may be incurred by any indemnified
Party in enforcing the indemnity and other obligations provided in the
indemnification provisions of the Merger Agreement.
The rights of each indemnified Party under the Merger Agreement are in
addition to, and not in limitation of, any other rights such indemnified Party
may have under the Eastern Charter or Bylaws, any indemnification agreement,
under the DGCL or otherwise. The indemnification provisions of the Merger
Agreement will survive the consummation of the Merger and expressly are
intended to benefit each of the indemnified Parties.
42
<PAGE>
STOCKHOLDERS AGREEMENT
The following is a summary of the material provisions of the Stockholders
Agreement, which is attached as Annex C to this Proxy Statement/Prospectus and
incorporated herein by reference. The following summary does not purport to be
complete and is qualified in its entirety by reference to the Stockholders
Agreement.
On August 16, 1998, Waste Management and Ocho Acquisition entered into a
Stockholders Agreement with Willard Miller, Louis D. Paolino, Jr., Glen
Miller, George O. Moorehead, Robert M. Kramer and Gregory M. Krzemien, who own
an aggregate of [ ] shares of Eastern Common Stock representing
[ ]% of the outstanding shares of Eastern Common Stock as of the Record
Date, which such stockholders have agreed not to, directly or indirectly, (i)
sell (other than pursuant to any brokers' transaction executed upon the
stockholder's orders on any exchange or in the over the counter market),
pledge (other than in connection with margin accounts maintained by such
stockholder) or otherwise dispose of any or all of such stockholder's shares,
(ii) deposit any shares into a voting trust or enter into a voting agreement
or arrangement with respect to any shares or grant any proxy with respect
thereto or (iii) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale (other
than pursuant to any brokers' transaction executed upon the stockholder's
orders on any exchange or in the over the counter market), assignment,
transfer or other disposition of any shares.
In addition, each such stockholder has appointed Ocho Acquisition, or any
nominee of Ocho Acquisition, with full power of substitution, as his true and
lawful attorney and proxy, for and in his name, place and stead, to vote each
of such shares as his proxy at every annual, special or adjourned meeting of
the stockholders of Eastern (including the right to sign his name (as
stockholder) to any consent, certificate or other document relating to Eastern
that may be permitted or required by applicable law) (i) in favor of the
adoption of the Merger Agreement and approval of the Merger and the other
transactions contemplated by the Merger Agreement, (ii) against any
transaction pursuant to an acquisition proposal or any other action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Eastern under the Merger
Agreement or which could result in any of the conditions to Eastern's
obligations under the Merger Agreement not being fulfilled, and (iii) in favor
of any other matter relating to the Merger Agreement. Each such stockholder
has further agreed to cause the number of shares over which he has voting
power to be voted in accordance with the foregoing.
The obligations of such stockholders under the Stockholders Agreement will
terminate upon the earlier of (i) the Effective Time or (ii) 180 days after
the termination of the Merger Agreement in case of termination that entitles
Waste Management to a termination fee or on the date of termination in the
case of termination for any other reason.
43
<PAGE>
THE COMPANIES
WASTE MANAGEMENT
Business. On July 16, 1998, Waste Management (formerly known as USA Waste
Services, Inc.) consummated the Waste Management Holdings Merger whereby Waste
Management Holdings, Inc. (formerly known as Waste Management, Inc.) was
merged with and into a wholly owned subsidiary of Waste Management. Upon
consummation of the Waste Management Holdings Merger, USA Waste Services, Inc.
changed its name to Waste Management, Inc. and Waste Management, Inc. changed
its name to Waste Management Holdings, Inc. Waste Management is a leading
international provider of waste management services.
The corporate headquarters of Waste Management is located at 1001 Fannin
Street, Suite 4000, Houston, Texas 77002, and its telephone number is (713)
512-6200. Waste Management is the largest waste management services company in
North America and has an extensive network of landfills, collection operations
and transfer stations throughout North America. Waste Management provides
comprehensive waste management and related services outside North America
through its subsidiary, Waste Management International plc ("WM
International"). WM International provides a wide range of solid and hazardous
waste management services in seven countries in Europe, seven countries in the
Asia-Pacific region and Argentina, Brazil and Israel.
Additional information concerning Waste Management is included in Waste
Management's reports filed under the Exchange Act that are incorporated by
reference in this Proxy Statement/Prospectus. See "Where You Can Find More
Information."
EASTERN
Business. Eastern is a non-hazardous solid waste management company
specializing in the collection, transportation, and disposal of residential,
industrial, commercial, and special waste, principally in the eastern United
States. Eastern currently provides solid waste collection services to
approximately 46,000 commercial and industrial customers and approximately
400,000 residential customers. Eastern's principal executive offices are
located at 1000 Crawford Place, Suite 400, Mt. Laurel, New Jersey 08054, and
its telephone number is (609) 235-6009.
Additional information concerning Eastern is included in Eastern's reports
filed under the Exchange Act that are incorporated by reference in this Proxy
Statement/Prospectus. See "Where You Can Find More Information."
Stock Ownership of Management. The following table sets forth certain
information as of September 22, 1998 as to the beneficial ownership of Eastern
Common Stock by (i) each person known to Eastern to own beneficially, as
defined in Rule 13d-3 under the Exchange Act, five percent or more of the
outstanding shares of Eastern Common Stock, based on Eastern's records, (ii)
each of Eastern's directors, (iii) Eastern's Chief Executive Officer, (iv) the
four other most highly compensated executive officers of Eastern as of
December 31, 1997, (v) one additional individual who was not serving as an
executive officer at December 31, 1997 but for whom disclosure is required
pursuant to the rules of the Commission, and (vi) all directors and persons
serving as executive officers of Eastern as a group. Except as otherwise
indicated, each person has sole voting power and sole investment power with
respect to all shares beneficially owned by such person.
44
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE
NAME OF BENEFICIAL OWNER OWNED(1)(2) OF SHARES
- ------------------------ ------------ ----------
<S> <C> <C>
Waste Management, Inc................................ 4,445,296(3) 12.1%
1001 Fannin, Suite 4000
Houston, Texas 77002
Willard Miller....................................... 1,480,688(4) 4.0%
Executive Vice President
Louis D. Paolino, Jr................................. 1,444,356(5) 3.9%
Chairman of the Board, President and Chief Executive
Officer
Glen Miller.......................................... 1,219,802(6) 3.3%
Executive Vice President
George O. Moorehead.................................. 458,131(7) 1.2%
Director
Matthew J. Paolino................................... 125,833(8) *
Director
Constantine N. Papadakis............................. -- --
Director
Terry W. Patrick..................................... 187,500(9) *
Former Executive Vice President and Chief Operating
Officer
Dennis Grimm......................................... 319,549(10) *
Executive Vice President and Chief Operating Officer
Robert M. Kramer..................................... 180,562(11) *
Executive Vice President, General Counsel and Secretary
All executive officers and directors as a group (12
persons)............................................ 5,490,745(12) 14.4%
</TABLE>
- --------
* Less than 1%
(1) The inclusion herein of any shares as beneficially owned does not
constitute an admission of beneficial ownership of those shares.
(2) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days upon the exercise
of an option or warrant ("currently exercisable") are treated as
outstanding for purposes of determining beneficial ownership and the
percentage beneficially owned by such individual.
(3) Includes 3,790,296 shares beneficially held by Willard Miller, Louis D.
Paolino, Jr., Glen Miller, George O. Moorehead, Robert M. Kramer and
Gregory Krzemien, each of whom has granted Ocho Acquisition certain
rights to vote his shares in connection with matters relating to the
Merger. See "Stockholders Agreement."
(4) Includes 19,412 shares held of record by W&G Miller Family Limited
Partnership, of which Mr. Miller serves as a general partner, and 181,907
shares purchasable under currently exercisable warrants held by such
partnership.
(5) Includes 35,000 shares held of record by entities controlled by Mr.
Paolino, 82,333 shares held by family members, and 504,282 shares
purchasable under currently exercisable options.
(6) Includes 181,907 shares purchasable under currently exercisable warrants.
(7) Includes 100,834 shares purchasable under currently exercisable options.
Also includes 2,297 shares held by Mr. Moorehead's children.
(8) Includes 37,500 shares purchasable under currently exercisable options.
Also includes 3,000 shares held by Mr. Paolino's children.
(9) Includes 100,000 shares purchasable under currently exercisable options.
Also includes 87,500 shares held by Beacon Holdings Ltd., an entity
controlled by Mr. Patrick. Mr. Patrick's employment with Eastern ceased
as of December 1, 1997.
(10) Includes 65,625 shares purchasable under currently exercisable options.
(11) Includes 123,198 shares purchasable under currently exercisable options.
(12) See footnotes 4 through 8, 10 and 11 above. Also includes an aggregate of
109,051 shares and 152,773 shares purchasable under currently exercisable
options held by four executive officers of Eastern who are not listed in
the table.
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<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following table sets forth for the periods and as of the dates indicated
certain unaudited supplemental per share information of Waste Management and
certain unaudited historical per share information of Eastern. This
information should be read in conjunction with the supplemental and historical
financial information included elsewhere in this Proxy Statement/Prospectus
and the separate historical financial statements of Waste Management and
Eastern incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
-------------------- JUNE 30,
1995 1996 1997 1998
----- ------ ------ ----------
<S> <C> <C> <C> <C>
SUPPLEMENTAL--WASTE MANAGEMENT
Basic earnings (loss) per common share:
Continuing operations........................ $1.00 $ 0.55 $(1.89) $ 0.76
Discontinued operations...................... 0.01 (0.50) 0.17 --
Extraordinary item........................... -- -- (0.01) (0.01)
Accounting change............................ -- -- -- --
----- ------ ------ ------
Net income (loss)............................ $1.01 $ 0.05 $(1.73) $ 0.75
===== ====== ====== ======
Diluted earnings (loss) per common share:
Continuing operations........................ $0.99 $ 0.54 $(1.89) $ 0.74
Discontinued operations...................... 0.01 (0.49) 0.17 --
Extraordinary item........................... -- -- (0.01) (0.01)
Accounting change............................ -- -- -- --
----- ------ ------ ------
Net income (loss)............................ $1.00 $ 0.05 $(1.73) $ 0.73
===== ====== ====== ======
Cash dividends per common share............... $0.59 $ 0.58 $ 0.57 $ 0.15
Book value per common share................... $ 8.78
Tangible book value per common share.......... $(1.32)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
------------------- DECEMBER 31, JUNE 30,
1995 1996 1997 1997 1998
----- ------ ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
HISTORICAL--EASTERN
Basic earnings (loss) per common
share............................ $0.16 $(0.29) $0.23 $0.21 $ 0.30
Diluted earnings (loss) per
common share..................... $0.16 $(0.29) $0.22 $0.20 $ 0.29
Cash dividends per common share... $0.22 $ 0.11 $0.04 $0.05 $ 0.03
Book value per common share....... $10.13
Tangible book value per common
share............................ $ 6.94
</TABLE>
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MARKET PRICE AND DIVIDEND INFORMATION
Waste Management Common Stock is traded on the NYSE under the symbol "WMI."
Eastern Common Stock is traded on the Nasdaq National Market under the symbol
"EESI."
MARKET PRICES
The table below sets forth, for the calendar quarters indicated, the range
of high and low sale prices of Waste Management Common Stock as reported on
the NYSE Composite Transaction Tape and Eastern Common Stock as reported on
the Nasdaq National Market.
<TABLE>
<CAPTION>
WASTE
MANAGEMENT EASTERN
COMMON STOCK COMMON STOCK
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1996
Quarter ended March 31, 1996....................... $25.63 $17.25 $ 1.75 $ 1.00
Quarter ended June 30, 1996........................ 32.63 24.00 7.13 1.25
Quarter ended September 30, 1996................... 34.13 22.75 7.06 5.00
Quarter ended December 31, 1996.................... 34.25 28.63 10.38 6.50
1997
Quarter ended March 31, 1997....................... $38.88 $28.63 $14.13 $ 8.38
Quarter ended June 30, 1997........................ 39.25 29.50 18.13 11.38
Quarter ended September 30, 1997................... 44.13 38.00 26.75 15.25
Quarter ended December 31, 1997.................... 41.75 32.63 26.25 18.25
1998
Quarter ended March 31, 1998....................... $46.88 $34.44 $27.75 $19.13
Quarter ended June 30, 1998........................ 49.94 44.69 35.06 24.00
Quarter ending September 30, 1998 (through
September 28, 1998)............................... [ ] [ ] [ ] [ ]
</TABLE>
On August 14, 1998, the last full trading day prior to the execution and
delivery of the Merger Agreement and the public announcement thereof, the last
reported sale price of Waste Management Common Stock on the NYSE Composite
Transaction Tape was $52.69 per share, and the last reported sale price of
Eastern Common Stock on the Nasdaq National Market was $32.00 per share.
On September 28, 1998, the most recent practicable date prior to the
printing of this Proxy Statement/Prospectus, the last reported sale price of
Waste Management Common Stock on the NYSE Composite Transaction Tape was $[ ]
per share, and the last reported sale price of Eastern Common Stock on the
Nasdaq National Market was $[ ] per share.
Because the market price of Waste Management Common Stock is subject to
fluctuation, the market value of the shares of Waste Management Common Stock
that holders of Eastern Common Stock will receive in the Merger, and the
market value of the Eastern Common Stock surrendered in the Merger, may
increase or decrease prior to (or after) the Merger. See "Risk Factors--Risks
Relating to the Merger--Fixed Exchange Ratio."
EASTERN STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
WASTE MANAGEMENT COMMON STOCK AND THE EASTERN COMMON STOCK.
DIVIDENDS
Until September 15, 1998, neither Waste Management nor Eastern had ever
declared cash dividends on their respective Common Stock. However, certain
companies acquired by each of Waste Management and Eastern have declared
dividends. Because the pooling of interests method of accounting assumes that
the companies have been merged from inception and the historical financial
statements prior to the consummation of the acquisition or merger, as the case
may be, are restated as though the companies had been combined from inception,
each of
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Waste Management and Eastern is required to, and currently report, cash
dividends per common share in their respective financial statements. On
September 15, 1998, Waste Management declared a cash dividend on its common
stock of $0.01 per share. The decision whether to apply legally available
funds to the payment of dividends on Waste Management Common Stock will be
made by the Waste Management Board from time to time in the exercise of its
business judgment.
DESCRIPTION OF WASTE MANAGEMENT CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Waste Management authorized capital stock consists of 1,500,000,000 shares
of Waste Management Common Stock and 10,000,000 shares of Preferred Stock,
$0.01 par value per share ("Waste Management Preferred Stock").
COMMON STOCK
As of the Record Date, there were [ ] outstanding shares of Waste
Management Common Stock held by approximately [ ] holders of record. The
holders of Waste Management Common Stock are entitled to one vote for each
share on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. The board of directors of Waste Management (the
"Waste Management Board") is classified into three classes of approximately
equal size, one of which is elected each year. Accordingly, holders of a
majority of the Waste Management Common Stock entitled to vote in any election
of directors may elect all of the directors standing for election. The holders
of Waste Management Common Stock are entitled to share ratably in all assets
of Waste Management which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of Waste Management Preferred Stock then outstanding. The holders
of Waste Management Common Stock have no preemptive, subscription, redemption
or conversion rights. The outstanding shares of Waste Management Common Stock
are fully paid and nonassessable. The rights, preferences and privileges of
holders of Waste Management Common Stock are subject to the rights of the
holders of shares of any series of Waste Management Preferred Stock which
Waste Management may issue in the future. Waste Management has never paid cash
dividends on the Waste Management Common Stock. The rights of holders of Waste
Management Common Stock to receive dividends are limited by Waste Management's
revolving credit agreement, which provides that Waste Management may not pay
any dividends in any fiscal year in excess of $25,000,000 plus, on a
cumulative basis, 50% of the consolidated net income of Waste Management for
such fiscal year.
PREFERRED STOCK
Shares of Waste Management Preferred Stock may be issued from time to time
in one or more series and the Waste Management Board, without further approval
of the stockholders, is authorized to fix the dividend rights and terms,
conversion rights and terms, voting rights, redemption rights and terms,
liquidation preferences, sinking funds and any other rights, preferences,
privileges and restrictions applicable to each such series of Waste Management
Preferred Stock. The purpose of authorizing the Waste Management Board to
determine such rights and preferences is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of Waste Management
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things,
adversely affect the voting power of holders of Waste Management Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of Waste Management. As of the date of this Proxy
Statement/Prospectus, there are no outstanding shares of Waste Management
Preferred Stock.
THE DGCL AND CERTAIN PROVISIONS OF WASTE MANAGEMENT'S CERTIFICATE OF
INCORPORATION
Waste Management has included in its Certificate of Incorporation (the
"Waste Management Charter") and its Bylaws (the "Waste Management Bylaws")
provisions to (i) eliminate the personal liability of its directors
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<PAGE>
for monetary damages resulting from breaches of their fiduciary duty to the
extent permitted by Section 102(b)(7) of the DGCL and (ii) indemnify its
directors and officers to the fullest extent permitted by Section 145 of the
DGCL, including under circumstances in which indemnification is otherwise
discretionary. Waste Management believes that these provisions are necessary
to attract and retain qualified persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Waste Management Common Stock is
Harris Trust and Savings Bank, Chicago, Illinois.
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the Merger, holders of Eastern Common Stock will become
holders of Waste Management Common Stock. The following is a summary of
certain of the material differences between the rights of holders of Eastern
Common Stock and the rights of holders of Waste Management Common Stock.
Because both Eastern and Waste Management are organized under the laws of the
State of Delaware, such differences arise from differences between various
provisions of the Eastern Charter and Bylaws and the Waste Management Charter
and Bylaws.
The following summary does not purport to be a complete statement of the
rights of holders of Waste Management Common Stock and Eastern Common Stock
under, and is qualified by its entirety by reference to, the DGCL and the
Charters and Bylaws of Waste Management and Eastern. See "Description of Waste
Management Stock" for a summary of certain other rights relating to the Waste
Management Common Stock.
NUMBER, CLASSIFICATION AND REMOVAL OF DIRECTORS
The number of directors of Waste Management shall be fixed by the Waste
Management Board and, unless approved by at least two-thirds of the incumbent
directors of Waste Management, shall not be less than three nor more than
nine. The Waste Management Board is divided into three classes serving
staggered three-year terms and any one or more of the directors of Waste
Management may be removed from office at any time, with or without cause, by
the holders of at least two-thirds of the shares then entitled to vote in an
election of directors. The Eastern Bylaws provide that the number of directors
shall be fixed from time to time by action of the stockholders or of the
directors, and, if the number is not fixed, the number shall be three. The
Eastern Board is not divided into separate classes of directors. Directors
serve until the next annual meeting of stockholders and until their successors
are elected and qualified. The Eastern Bylaws provide that, except as may
otherwise be provided by the DGCL, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of the
majority of the shares then entitled to vote at an election of directors.
ADVANCE NOTICE OF STOCKHOLDER PROPOSALS
The Bylaws of Waste Management provide that a stockholder must give advance
written notice if the stockholder intends to bring any business before a
meeting of stockholders or to make nominations for the board of directors. The
Bylaws of Waste Management require that, for business to be properly brought
by a stockholder before an annual meeting, notice must be delivered to or
mailed by the stockholder and received at the principal executive offices of
Waste Management not less than 120 days, nor more than 150 days, prior to the
anniversary of the date Waste Management's proxy statement was released to its
stockholders in connection with the prior year's annual meeting; provided,
however, that if no annual meeting was held the previous year, or if the date
of the annual meeting has been changed by more than 30 calendar days from the
date contemplated at the time of the previous year's proxy statement, the
stockholder's notice must be received at least 80 days prior to the date Waste
Management intends to distribute its proxy statement with respect to such
meeting.
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<PAGE>
To be timely with respect to a special meeting of Waste Management's
stockholders, a stockholder's notice must be delivered to or mailed by the
stockholder and received by Waste Management not less than 60 nor more than 90
days prior to the date of the meeting. However, if less than 70 days' notice
or prior public disclosure of the date of the special meeting is given or made
to the stockholders, the stockholder's notice must be received not later than
the fifth day following the mailing of the notice of the special meeting or
such public disclosure.
The Bylaws of Eastern do not require advance written notice if the
stockholder intends to bring any business before a meeting of stockholders or
to make nominations for the board of directors.
RIGHT TO CALL SPECIAL MEETINGS
The Bylaws of Waste Management provide that special meetings of stockholders
may be called by the Chairman, the Chief Executive Officer or by a majority of
directors.
The Bylaws of Eastern provide that special meetings of stockholders may be
called by the board of directors or by any officer instructed by the Board to
call the meeting.
TRANSACTIONS WITH INTERESTED STOCKHOLDER; DGCL SECTION 203
Both Waste Management and Eastern are subject to Section 203 of the DGCL
("Section 203"). Section 203 prevents an "Interested Stockholder" of a
corporation (generally defined to mean any beneficial owner of more than 15%
of the corporation's voting stock) from engaging in any "business combination"
(as defined in Section 203) with the corporation for a period of three years
following the time that such Interested Stockholder became an Interested
Stockholder, unless: (i) before such person became an Interested Stockholder,
the board of directors of the corporation approved either the business
combination in question or the transaction which resulted in the Interested
Stockholder becoming an Interested Stockholder; (ii) upon consummation of the
transaction which resulted in the Interested Stockholder becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding (for purposes of determining the number of shares
outstanding) shares held by directors who are also officers and employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) concurrently with or following the
transaction which resulted in the Interested Stockholder becoming an
Interested Stockholder, the business combination is (x) approved by the board
of directors of the corporation and (y) authorized at a meeting of
stockholders by the affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder. A "business combination," as defined in Section 203, includes
certain mergers, stock transfers, asset sales and certain other transactions
resulting in a financial benefit to the Interested Stockholder.
AMENDMENT OF CHARTER AND BYLAWS
Amendment of Charter. The Waste Management Charter provides that, at a
meeting of stockholders, the affirmative vote of the holders of at least two-
thirds of the total number of votes of the then outstanding shares of stock of
Waste Management entitled to vote generally in the election of directors,
voting together as a single class, shall be required to adopt any provision
inconsistent with, or to amend or appeal provisions in the Waste Management
Charter that concern the size or classification of the Waste Management Board,
the removal of directors and the filling of vacancies on the Waste Management
Board. The Waste Management Charter further provides that notice of such
proposed alteration or amendment must be included in the notice of such
stockholders' meeting.
The Eastern Charter contains no comparable provision. Therefore, under the
DGCL, the vote of a majority of outstanding stock entitled to vote thereon,
and the vote of a majority of the outstanding stock of each class entitled to
vote thereon as a class, are necessary to approve an amendment to the Eastern
Charter.
50
<PAGE>
Amendment of Bylaws. The Waste Management Board may adopt, amend or repeal
the Bylaws of Waste Management, or adopt new Bylaws, without any action on the
part of the stockholders; provided, however, that no such adoption, amendment
or repeal shall be valid with respect to Bylaw provisions which have been
adopted, amended or repealed by the stockholders; and further provided that
Bylaws adopted or amended by the Waste Management Board and any powers thereby
conferred may be amended, altered or repealed by the stockholders.
The Eastern Bylaws provide that, subject to the provisions of the Charter
and the provisions of the DGCL, the power to amend, alter or repeal Bylaws and
to adopt new Bylaws may be exercised by the board of directors or by the
stockholders.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, Eastern will hold a 1999 Annual Meeting of
Stockholders (the "Annual Meeting"). The deadline for stockholders to submit
proposals pursuant to Rule 14a-8 of the Exchange Act for inclusion in
Eastern's proxy statement and form of proxy for the Annual Meeting is December
21, 1998. The date after which notice of a stockholder proposal submitted
outside of the processes of Rule 14a-8 of the Exchange Act is considered
untimely is March 8, 1999. If notice of a stockholder proposal submitted
outside of the processes of Rule 14a-8 of the Exchange Act is received by
Eastern after March 8, 1999, then Eastern's proxy for the Annual Meeting may
confer discretionary authority to vote on such matter without any discussion
of such matter in the proxy statement for the Annual Meeting.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities offered
hereby and the federal income tax consequences of the Merger will be passed
upon for Waste Management by Shearman & Sterling. Certain legal matters in
connection with the federal income tax consequences of the Merger will be
passed upon for Eastern by Drinker Biddle & Reath LLP.
EXPERTS
The supplemental financial statements appearing in Waste Management's
Current Report on Form 8-K dated September 23, 1998 incorporated by reference
in this Proxy Statement/Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their report. In their report,
that firm states that with respect to USA Waste Services, Inc. (prior to the
consummation of the Waste Management Holdings Merger and prior to USA Waste's
subsequent name change to "Waste Management, Inc.") its opinion is based on
the reports of other independent public accountants, namely
PricewaterhouseCoopers LLP. The financial statements referred to above have
been included herein in reliance upon the authority of Arthur Andersen LLP as
experts in giving said report.
The consolidated financial statements of Eastern at December 31, 1997 and
June 30, 1997 and 1996 and for the six-month period ended December 31, 1997
and each of the three years in the period ended June 30, 1997 appearing in
Eastern's Current Report on Form 8-K (dated September 22, 1998), which are
incorporated by reference herein, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated by reference herein which as to the six-month period ended
December 31, 1997 and each of the three years in the period ended June 30,
1997 is based in part on the reports of Christopher Rayner & Associates,
independent auditors, and as to each of the two years in the period ended June
30, 1996, is based in part on the reports of Bardall, Weintraub P.C. and
Paternostro, Callahan & DeFreitas, LLP, independent auditors. Such financial
statements are incorporated by reference herein in reliance upon such reports
given upon the authority of Ernst & Young LLP as experts in accounting and
auditing.
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WHERE YOU CAN FIND MORE INFORMATION
Waste Management and Eastern are each subject to the informational
requirements of the Exchange Act and, in accordance therewith file reports,
proxy statements and other information with the Commission. The reports, proxy
statements and other information filed by Waste Management and Eastern with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 7 World Trade
Center, 13th floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, Washington, D.C. 20549. Information regarding
the Public Reference Room may be obtained by calling the Commission at (800)
732-0330. In addition, Waste Management and Eastern are each required to file
electronic versions of such material with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide 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. Waste
Management Common Stock is listed on the NYSE and reports and other
information concerning Waste Management can also be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005. Eastern Common Stock
is listed on the Nasdaq National Market and reports and other information
concerning Eastern can also be inspected at the offices of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington,
D.C. 20001-1500.
Waste Management has filed with the Commission a Registration Statement on
Form S-4 under the Exchange Act with respect to the shares of Waste Management
Common Stock to be issued pursuant to the Merger Agreement. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement. For further information with respect to Waste
Management, Eastern and the Waste Management Common Stock, reference is hereby
made to the Registration Statement (including the exhibits and schedules
thereto).
The Commission allows us to "incorporate by reference" information into this
Proxy Statement/Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the Commission. Statements contained in this Proxy Statement/Prospectus or in
any document incorporated by reference in this Proxy Statement/Prospectus as
to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document (if any) filed as an exhibit to
the Registration Statement or such other document, each such statement being
qualified in all respects by such reference. The information incorporated by
reference is deemed to be part of this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that Waste Management and Eastern have previously filed with the Commission.
These documents contain important information about Waste Management and
Eastern and their finances.
WASTE MANAGEMENT (FILE NO. 1-12154) INCORPORATES BY REFERENCE HEREIN THE
FOLLOWING DOCUMENTS PREVIOUSLY FILED WITH THE COMMISSION:
1. Waste Management's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997;
2. Waste Management's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998 and June 30, 1998 (as amended on Form 10-Q/A filed on
August 28, 1998);
3. The following Current Reports on Form 8-K of Waste Management:
(a) Form 8-K dated March 12, 1998;
(b) Form 8-K dated July 16, 1998;
(c) Form 8-K dated July 17, 1998 (as amended on Form 8-K/A filed on
August 12, 1998);
(d) Form 8-K dated August 17, 1998;
(e) Form 8-K dated September 22, 1998;
(f) Form 8-K dated September 23, 1998; and
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4. Description of Waste Management's capital stock contained in Waste
Management's Registration Statement on Form 8-A, dated July 1, 1993 (as
amended on Form 8-B filed on July 13, 1995).
EASTERN (FILE NO. 0-16102) INCORPORATES BY REFERENCE HEREIN THE FOLLOWING
DOCUMENTS PREVIOUSLY FILED WITH THE COMMISSION:
1. Eastern's Annual Report on Form 10-K for the fiscal year ended June
30, 1997 (as amended on Form 10-K/A filed October 28, 1997), excluding the
financial statements and notes thereto, selected consolidated financial
data, and the information contained under Management's Discussion and
Analysis of Financial Condition and Results of Operations which have been
superseded by the financial statements and notes thereto, the selected
consolidated financial data, and the information contained under
Management's Discussion and Analysis of Financial Condition and Result of
Operations included in Eastern's Current Report on Form 8-K dated September
22, 1998;
2. Eastern's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1997, December 31, 1997, March 31, 1998 (as amended on Form
10-Q/A filed August 14, 1998) and June 30, 1998; the financial statements
and notes thereto contained in the Quarterly Report on Form 10-Q for the
quarters ended September 30, 1997, December 31, 1997 and March 31, 1998 are
deemed to be outdated as they are not on a basis consistent with the
consolidated financial statements and notes thereto included in Eastern's
Current Report on Form 8-K dated September 22, 1998 as they do not reflect:
(a) pooling of interests accounting for acquisitions that occurred
subsequent to the dates of the respective quarterly reports; and
(b) as it relates to the quarter ended September 30, 1997, earnings
per share information calculated in accordance with the recently issued
pronouncement FASB 128, Earnings Per Share;
3. Eastern's Transition Report on Form 10-K for the six months ended
December 31, 1997, excluding the financial statements and notes thereto,
selected consolidated financial data, and the information contained under
Management's Discussion and Analysis of Financial Condition and Results of
Operations which have been superseded by the financial statements and notes
thereto, the selected financial data, and the information contained under
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in Eastern's Current Report on Form 8-K dated September
22, 1998;
4. The following Current Reports on Form 8-K of Eastern:
(a) five Forms 8-K/A filed on July 10, 1997 for the purpose of: (i)
amending Eastern's Form 8-K/A dated July 2, 1996; (ii) amending
Eastern's Form 8-K dated September 27, 1996; (iii) amending Eastern's
Form 8-K dated December 10, 1996; (iv) amending Eastern's Form 8-K
dated January 31, 1997; and (v) amending Eastern's Form 8-K dated March
31, 1997;
(b) Form 8-K dated May 12, 1997 (as amended on Form 8-K/A filed July
11, 1997 and as amended on Form 8-K/A filed July 25, 1997);
(c) Form 8-K dated August 15, 1997 (as amended on Form 8-K/A filed
October 10, 1997);
(d) Form 8-K dated August 20, 1997 (as amended on Form 8-K/A filed
November 3, 1997);
(e) Form 8-K dated October 17, 1997;
(f) Form 8-K dated October 27, 1997;
(g) Form 8-K dated December 1, 1997 (as amended on Form 8-K/A filed
February 17, 1998);
(h) Form 8-K dated December 1, 1997 (as amended on Form 8-K/A filed
February 13, 1998);
(i) Form 8-K dated February 12, 1998 (as amended on Form 8-K/A filed
April 27, 1998);
(j) Form 8-K dated February 27, 1998, excluding the financial
statements and notes thereto, selected consolidated financial data, and
the information contained under Management's Discussion and Analysis of
Financial Condition and Results of Operations, which have been
superseded by the financial statements and notes thereto, the selected
consolidated financial data, and the information contained under
Management's Discussion and Analysis of Financial Condition and Result
of Operations included in Eastern's Current Report on Form 8-K dated
September 22, 1998;
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(k) Form 8-K dated March 9, 1998 (as amended on Form 8-K/A filed
April 8, 1998);
(l) Form 8-K dated March 31, 1998 (as amended on Form 8-K/A filed
April 24, 1998);
(m) Form 8-K dated March 31, 1998;
(n) Form 8-K dated April 1, 1998;
(o) Form 8-K dated April 20, 1998 (as amended on Forms 8-K/A filed
May 20, 1998 and August 7, 1998);
(p) Form 8-K dated April 24, 1998 excluding the financial statements
and notes thereto, selected consolidated financial data, and the
information contained under Management's Discussion and Analysis of
Financial Condition and Results of Operations, which have been
superseded by the financial statements and notes thereto, the selected
consolidated financial data, and the information contained under
Management's Discussion and Analysis of Financial Condition and Result
of Operations included in Eastern's Current Report on Form 8-K dated
September 22, 1998;
(q) Form 8-K dated May 1, 1998;
(r) Form 8-K dated May 20, 1998 excluding the financial statements
and notes thereto, selected consolidated financial data, and the
information contained under Management's Discussion and Analysis of
Financial Condition and Results of Operations, which have been
superseded by the financial statements and notes thereto, the selected
consolidated financial data, and the information contained under
Management's Discussion and Analysis of Financial Condition and Result
of Operations included in Eastern's Current Report on Form 8-K dated
September 22, 1998;
(s) Form 8-K dated May 27, 1998;
(t) Forms 8-K dated June 26, 1998 (both amended on Forms 8-K/A filed
September 4, 1998);
(u) Form 8-K dated August 17, 1998;
(v) Form 8-K dated August 20, 1998;
(w) Form 8-K dated August 21, 1998;
(x) Form 8-K dated September 4, 1998; and
(y) Form 8-K dated September 22, 1998.
All documents and reports subsequently filed by Waste Management or Eastern
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Proxy Statement/Prospectus and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the date of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement/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 Proxy Statement/Prospectus.
The Proxy Statement/Prospectus incorporates important business and financial
information about Waste Management and Eastern that is not included in or
delivered with this Proxy Statement/Prospectus. Documents incorporated by
reference which are not presented herein or delivered herewith (other than
exhibits to such documents unless such exhibits are specifically incorporated
by reference) are available to any person, including any beneficial owner, to
whom this Proxy Statement/Prospectus is delivered, on written or oral request,
without charge, in the case of documents relating to Waste Management,
directed to Waste Management, Inc., 1001 Fannin, Suite 4000, Houston, Texas
77002 (telephone number (713) 512-6200), Attention: Secretary, or, in the case
of documents relating to Eastern, directed to Eastern Environmental Services,
Inc., 1000 Crawford Place,
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Suite 400, Mt. Laurel, New Jersey 08054 (telephone number (609) 235-6009),
Attention: Secretary. In order to ensure timely delivery of any of such
documents, any request should be made by October 29, 1998.
No persons have been authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus in
connection with the solicitations of proxies or the offering of securities made
hereby and, if given or made, such information or representation must not be
relied upon as having been authorized by Waste Management, Eastern or any other
person. This Proxy Statement/Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, any securities, or the solicitation of a
proxy, in any jurisdiction to or from any person to whom it is not lawful to
make any such offer or solicitation in such jurisdiction. Neither the delivery
of this Proxy Statement/Prospectus nor any distribution of securities made
hereunder shall under any circumstances create an implication that there has
been no change in the affairs of Waste Management or Eastern since the date
hereof or that the information herein is correct as of any time subsequent to
its date.
By Order of the Board of Directors of
Eastern Environmental Services, Inc.
/s/ Robert M. Kramer
Robert M. Kramer
Secretary
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ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 16, 1998
BY AND AMONG
WASTE MANAGEMENT, INC.
OCHO ACQUISITION CORPORATION
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
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TABLE OF CONTENTS
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ARTICLE I
The Merger
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Section 1.1The Merger................................................. A-1
Section 1.2Effective Time of the Merger............................... A-1
ARTICLE II
The Surviving and Parent Corporations
Section 2.1Certificate of Incorporation............................... A-1
Section 2.2By-Laws.................................................... A-2
Section 2.3Directors.................................................. A-2
Section 2.4Officers................................................... A-2
ARTICLE III
Conversion of Shares
Section 3.1Conversion of Company Shares in the Merger................. A-2
Section 3.2Conversion of Subsidiary Shares............................ A-2
Section 3.3Exchange of Certificates................................... A-2
Section 3.4No Fractional Shares....................................... A-3
Section 3.5Closing.................................................... A-4
Section 3.6Closing of the Company's Transfer Books.................... A-4
ARTICLE IV
Representations and Warranties of Parent and Subsidiary
Section 4.1 Organization and Qualification............................ A-5
Section 4.2Capitalization............................................. A-5
Section 4.3 Subsidiaries.............................................. A-6
Section 4.4Authority; Non-Contravention; Approvals.................... A-6
Section 4.5Reports and Financial Statements........................... A-7
Section 4.6Absence of Undisclosed Liabilities......................... A-7
Section 4.7Absence of Certain Changes or Events....................... A-8
Section 4.8Litigation................................................. A-8
Section 4.9Registration Statement and Proxy Statement................. A-8
Section 4.10Violation of Law.......................................... A-8
Section 4.11Reorganization and Pooling of Interests................... A-9
Section 4.12Brokers and Finders....................................... A-9
Section 4.13Ownership of Company Common Stock......................... A-9
Section 4.14Subsidiary................................................ A-9
ARTICLE V
Representations and Warranties of the Company
Section 5.1 Organization and Qualification............................ A-10
Section 5.2Capitalization............................................. A-10
Section 5.3Subsidiaries............................................... A-10
Section 5.4Authority; Non-Contravention; Approvals.................... A-11
Section 5.5Reports and Financial Statements........................... A-12
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Section 5.6Absence of Undisclosed Liabilities........................ A-12
Section 5.7Absence of Certain Changes or Events...................... A-12
Section 5.8Litigation................................................ A-12
Section 5.9Registration Statement and Proxy Statement................ A-13
Section 5.10No Violation of Law...................................... A-13
Section 5.11Compliance with Agreements............................... A-13
Section 5.12Taxes.................................................... A-14
Section 5.13Employee Benefit Plans; ERISA............................ A-14
Section 5.14Labor Controversies...................................... A-16
Section 5.15Environmental Matters.................................... A-16
Section 5.16Non-Competition Agreements............................... A-17
Section 5.17Title to Assets.......................................... A-17
Section 5.18Reorganization and Pooling of Interests.................. A-17
Section 5.19Company Stockholders' Approval........................... A-17
Section 5.20Brokers and Finders...................................... A-17
Section 5.21Opinion of Financial Advisor............................. A-18
ARTICLE VI
Conduct of Business Pending the Merger
Section 6.1Conduct of Business by the Company Pending the Merger..... A-18
Section 6.2Conduct of Business by Parent and Subsidiary Pending the
Merger............................................................... A-20
Section 6.3Control of the Company's Operations....................... A-20
Section 6.4Control of Parent's Operations............................ A-21
Section 6.5Acquisition Transactions.................................. A-21
ARTICLE VII
Additional Agreements
Section 7.1Access to Information..................................... A-21
Section 7.2Registration Statement and Proxy Statement................ A-22
Section 7.3Stockholders' Approvals................................... A-22
Section 7.4Compliance with the Securities Act........................ A-22
Section 7.5Exchange Listing.......................................... A-23
Section 7.6Expenses and Fees......................................... A-23
Section 7.7Agreement to Cooperate.................................... A-23
Section 7.8Public Statements......................................... A-24
Section 7.9Option Plans.............................................. A-24
Section 7.10Notification of Certain Matters.......................... A-25
Section 7.11Directors' and Officers' Indemnification................. A-25
Section 7.12Corrections to the Proxy Statement/Prospectus and
Registration Statement............................................... A-26
Section 7.13Assumption of Registration Rights Agreements............. A-27
Section 7.14Company Employees........................................ A-27
ARTICLE VIII
Conditions
Section 8.1Conditions to Each Party's Obligation to Effect the
Merger............................................................... A-27
Section 8.2Conditions to Obligation of the Company to Effect the
Merger............................................................... A-28
Section 8.3Conditions to Obligations of Parent and Subsidiary to
Effect the Merger.................................................... A-28
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ARTICLE IX
Termination, Amendment and Waiver
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Section 9.1Termination................................................ A-29
Section 9.2Effect of Termination...................................... A-30
Section 9.3Amendment.................................................. A-30
Section 9.4Waiver..................................................... A-30
ARTICLE X
General Provisions
Section 10.1Non-Survival of Representations and Warranties............. A-30
Section 10.2Notices.................................................... A-30
Section 10.3Interpretation............................................. A-31
Section 10.4Miscellaneous.............................................. A-31
Section 10.5Counterparts............................................... A-31
Section 10.6Parties in Interest........................................ A-31
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GLOSSARY OF DEFINED TERMS
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Acquisition Proposal................................................... A-21
Acquisition Transaction................................................ A-21
Affiliate Agreement.................................................... A-22
Agreement.............................................................. A-1
Antitrust Division..................................................... A-23
APB No. 16............................................................. A-19
Business Combination................................................... A-23
Closing................................................................ A-4
Closing Date........................................................... A-4
Code................................................................... A-1
Company................................................................ A-1
Company Certificates................................................... A-3
Company Common Stock................................................... A-2
Company Disclosure Schedule............................................ A-9
Company Financial Statements........................................... A-12
Company Options........................................................ A-24
Company Permits........................................................ A-13
Company Plans.......................................................... A-15
Company Preferred Stock................................................ A-10
Company Representatives................................................ A-22
Company Required Statutory Approvals................................... A-11
Company SEC Reports.................................................... A-12
Company Stockholders' Approval......................................... A-22
DGCL................................................................... A-1
Effective Time......................................................... A-1
Environmental Law...................................................... A-16
ERISA.................................................................. A-14
Excess Shares.......................................................... A-4
Exchange Act........................................................... A-7
Exchange Agent......................................................... A-2
Exchange Ratio......................................................... A-2
Existing Credit Facilities............................................. A-18
FTC.................................................................... A-23
Hazardous Substance.................................................... A-17
HSR Act................................................................ A-7
indemnified Parties.................................................... A-25
indemnified Party...................................................... A-25
Merger................................................................. A-1
Merger Filing.......................................................... A-1
NYSE................................................................... A-4
Parent................................................................. A-1
Parent Common Stock.................................................... A-2
Parent Financial Statements............................................ A-7
Parent Permits......................................................... A-9
Parent Preferred Stock................................................. A-5
Parent Representatives................................................. A-21
Parent Required Statutory Approvals.................................... A-7
Parent SEC Reports..................................................... A-7
Pooling Transaction.................................................... A-9
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Potential Acquirer..................................................... A-21
Proxy Statement........................................................ A-8
Proxy Statement/Prospectus............................................. A-8
Registration Statement................................................. A-8
SEC.................................................................... A-7
Securities Act......................................................... A-7
Subsidiary............................................................. A-1
Subsidiary Common Stock................................................ A-2
Superior Proposal...................................................... A-21
Surviving Corporation.................................................. A-1
Tax Return............................................................. A-14
Taxes.................................................................. A-14
Termination Date....................................................... A-29
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 16, 1998 (this
"Agreement"), is made and entered into by and among Waste Management, Inc., a
Delaware corporation ("Parent"), Ocho Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Subsidiary"), and
Eastern Environmental Services, Inc., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Subsidiary and the Company have
approved the merger of Subsidiary with and into the Company on the terms set
forth in this Agreement (the "Merger");
WHEREAS, Parent, Subsidiary and the Company intend the Merger to qualify as
a tax-free reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder
and to be considered a pooling of interests for financial accounting purposes;
and
WHEREAS, certain officers of the Company owning stock of the Company have
entered into shareholder support agreements dated as of the date hereof.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the General Corporation Law of the State of Delaware (the "DGCL"),
Subsidiary shall be merged with and into the Company and the separate
existence of Subsidiary shall thereupon cease. The Company shall be the
surviving corporation in the Merger and is hereinafter sometimes referred to
as the "Surviving Corporation."
Section 1.2 Effective Time of the Merger. The Merger shall become effective
at such time (the "Effective Time") as shall be stated in a certificate of
merger, in a form mutually acceptable to Parent and the Company, to be filed
with the Secretary of State of the State of Delaware in accordance with the
DGCL (the "Merger Filing"). The Merger Filing shall be made simultaneously
with or as soon as practicable after the closing of the transactions
contemplated by this Agreement in accordance with Section 3.5. The parties
acknowledge that it is their mutual desire and intent to consummate the Merger
as soon as practicable after the date hereof. Accordingly, the parties shall,
subject to the provisions hereof and to the fiduciary duties of their
respective boards of directors, use all reasonable efforts to consummate, as
soon as practicable, the transactions contemplated by this Agreement in
accordance with Section 3.5.
ARTICLE II
The Surviving and Parent Corporations
Section 2.1 Certificate of Incorporation. The Certificate of Incorporation
of the Company except for Article One shall be amended as of the Effective
Time to be identical to the Certificate of Incorporation of Subsidiary, as in
effect immediately prior to the Effective Time, and shall be the Certificate
of Incorporation of the Surviving Corporation after the Effective Time, and
thereafter may be amended in accordance with its terms and as provided in the
DGCL, except that no amendment shall be made to, nor shall any provision be
included which is inconsistent with, Article Nine of the Certificate of
Incorporation of the Company.
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Section 2.2 By-Laws. The By-laws of Subsidiary as in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Corporation
after the Effective Time and (subject to Section 7.11 hereof) thereafter may
be amended in accordance with their terms and as provided by the Certificate
of Incorporation of the Surviving Corporation and the DGCL.
Section 2.3 Directors. The directors of Subsidiary in office immediately
prior to the Effective Time shall be the directors of the Surviving
Corporation after the Effective Time, and such directors shall serve in
accordance with the By-laws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
Section 2.4 Officers. The officers of Subsidiary in office immediately prior
to the Effective Time shall be the officers of the Surviving Corporation after
the Effective Time, and such officers shall serve in accordance with the By-
laws of the Surviving Corporation until their respective successors are duly
elected or appointed and qualified.
ARTICLE III
Conversion of Shares
Section 3.1 Conversion of Company Shares in the Merger. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of Parent or the Company:
(a) each share of the common stock, par value $.01 per share, of the
Company (the "Company Common Stock") shall, subject to Sections 3.3 and
3.4, be converted into the right to receive, without interest, 0.6406 (the
"Exchange Ratio") shares of the common stock, par value $.01 per share, of
Parent ("Parent Common Stock");
(b) each share of capital stock of the Company, if any, owned by Parent
or any subsidiary of Parent or held in treasury by the Company or any
subsidiary of the Company immediately prior to the Effective Time shall be
canceled and no consideration shall be paid in exchange therefor and shall
cease to exist from and after the Effective Time; and
(c) each unexpired warrant to purchase Company Common Stock that is
outstanding at the Effective Time, whether or not exercisable, shall
automatically and without any action on the part of the holder thereof be
converted into a warrant to purchase a number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock that could be
purchased under such warrant multiplied by the Exchange Ratio, at a price
per share of Parent Common Stock equal to the per share exercise price of
such warrant divided by the Exchange Ratio.
Section 3.2 Conversion of Subsidiary Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent as the sole
stockholder of Subsidiary, each issued and outstanding share of common stock,
par value $.01 per share, of Subsidiary ("Subsidiary Common Stock") shall be
converted into one share of common stock, par value $.01 per share, of the
Surviving Corporation.
Section 3.3 Exchange of Certificates. (a) From and after the Effective Time,
each holder of an outstanding certificate which immediately prior to the
Effective Time represented shares of Company Common Stock shall be entitled to
receive in exchange therefor, upon surrender thereof to an exchange agent
reasonably satisfactory to Parent and the Company (the "Exchange Agent"), a
certificate or certificates representing the number of whole shares of Parent
Common Stock to which such holder is entitled pursuant to Section 3.1(a).
Notwithstanding any other provision of this Agreement, (i) until holders or
transferees of certificates theretofore representing shares of Company Common
Stock have surrendered them for exchange as provided herein, no dividends or
other distributions shall be paid with respect to any shares represented by
such certificates and no payment for fractional shares shall be made and (ii)
without regard to when such certificates representing shares of Company Common
Stock are surrendered for exchange as provided herein, no interest shall be
paid on any dividends or other distributions or any payment for fractional
shares. Upon surrender of a certificate which
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immediately prior to the Effective Time represented shares of Company Common
Stock, there shall be paid to the holder of such certificate the amount of any
dividends or other distributions which theretofore became payable, but which
were not paid by reason of the foregoing, with respect to the number of whole
shares of Parent Common Stock represented by the certificate or certificates
issued upon such surrender.
(b) If any certificate for shares of Parent Common Stock is to be issued in
a name other than that in which the certificate for shares of Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition
of such exchange that the person requesting such exchange shall pay any
applicable transfer or other taxes required by reason of such issuance.
(c) Within five days after the Effective Time, Parent shall make available
to the Exchange Agent the certificates representing shares of Parent Common
Stock required to effect the exchanges referred to in paragraph (a) above and
cash for payment of any fractional shares referred to in Section 3.4.
(d) Within five days after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Company Certificates") (i) a
letter of transmittal satisfactory to the Company and approved by it prior to
Closing (which shall specify that delivery shall be effected, and risk of loss
and title to the Company Certificates shall pass, only upon actual delivery of
the Company Certificates to the Exchange Agent) and (ii) instructions for use
in effecting the surrender of the Company Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of
Company Certificates for cancellation to the Exchange Agent, together with a
duly executed letter of transmittal and such other documents as the Exchange
Agent shall reasonably require, the holder of such Company Certificates shall
be entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock into which the shares of Company
Common Stock theretofore represented by the Company Certificates so
surrendered shall have been converted pursuant to the provisions of Section
3.1(a), and the Company Certificates so surrendered shall be canceled.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of Company Common Stock for any shares
of Parent Common Stock or dividends or distributions thereon delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(e) Promptly following the date which is nine months after the Effective
Time, the Exchange Agent shall deliver to Parent all cash, certificates
(including any Parent Common Stock) and other documents in its possession
relating to the transactions described in this Agreement, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Parent Common Stock, without any
interest thereon. Notwithstanding the foregoing, none of the Exchange Agent,
Parent, Subsidiary, the Company or the Surviving Corporation shall be liable
to a holder of shares of Company Common Stock for any shares of Parent Common
Stock delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Parent Common Stock deliverable in respect thereof determined
in accordance with this Article III. When authorizing such issuance in
exchange therefor, the Board of Directors of the Surviving Corporation may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Company Certificate to give the
Surviving Corporation such indemnity as it may reasonably direct as protection
against any claim that may be made against the Surviving Corporation with
respect to the Company Certificate alleged to have been lost, stolen or
destroyed.
Section 3.4 No Fractional Shares. (a) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Company Certificates, no dividend or
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distribution with respect to Parent Common Stock shall be payable on or with
respect to any fractional share and such fractional share interests will not
entitle the owner thereof to any rights of a stockholder of Parent.
(b) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (x) the number of full shares of Parent
Common Stock delivered to the Exchange Agent by Parent over (y) the aggregate
number of full shares of Parent Common Stock to be distributed to holders of
Company Common Stock (such excess being herein called the "Excess Shares"). As
soon after the Effective Time as practicable, the Exchange Agent, as agent for
such holders of Parent Common Stock, shall sell the Excess Shares at then
prevailing prices on the New York Stock Exchange, Inc. (the "NYSE"), all in
the manner provided in paragraph (c) of this Section 3.4.
(c) The sale of the Excess Shares by the Exchange Agent shall be executed on
the NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. The Exchange Agent shall use all
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment,
is practicable consistent with obtaining the best execution of such sales in
light of prevailing market conditions. Until the net proceeds of any such sale
or sales have been distributed to such holders of Company Common Stock, the
Exchange Agent will hold such proceeds in trust for such holders of Company
Common Stock. Parent shall pay all commissions, transfer taxes and other out-
of-pocket transaction costs of the Exchange Agent incurred in connection with
such sale or sales of Excess Shares. In addition, Parent shall pay the
Exchange Agent's compensation and expenses in connection with such sale or
sales. The Exchange Agent shall determine the portion of such net proceeds to
which each holder of Company Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds by a fraction the
numerator of which is the amount of the fractional share interest to which
such holder of Company Common Stock is entitled (after taking into account all
shares of Company Common Stock then held by such holder) and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of Certificates representing Company Common Stock are entitled.
(d) Notwithstanding the provisions of this Section 3.4, Parent may elect, at
its option exercised prior to the Effective Time and in lieu of the issuance
and sale of Excess Shares and the making of the payments contemplated in such
subsections, to pay to the Exchange Agent an amount in cash sufficient for the
Exchange Agent to pay each holder of Company Common Stock an amount in cash
equal to the product obtained by multiplying (x) the fractional share interest
to which such holder would otherwise be entitled (after taking into account
all shares of Company Common Stock held at the Effective Time by such holder)
by (y) the closing price for a share of Parent Common Stock on the NYSE on the
first business day immediately following the Effective Time and, in such case,
all references herein to the cash proceeds of the sale of the Excess Shares
and similar references shall be deemed to mean and refer to the payments
calculated as set forth in this Section 3.4(d)).
(e) As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall promptly pay such amounts
to such holders of Company Common Stock.
Section 3.5 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a location mutually
agreeable to Parent and the Company as promptly as practicable (but in any
event within five business days) following the date on which the last of the
conditions set forth in Article VIII is fulfilled or waived, or at such other
time and place as Parent and the Company shall agree. The date on which the
Closing occurs is referred to in this Agreement as the "Closing Date."
Section 3.6 Closing of the Company's Transfer Books. At and after the
Effective Time, holders of Company Certificates shall cease to have any rights
as stockholders of the Company, except for the right to receive shares of
Parent Common Stock pursuant to Section 3.1 and the right to receive cash for
payment of fractional shares pursuant to Section 3.4. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time
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shall thereafter be made. If, after the Effective Time, subject to the terms
and conditions of this Agreement, Company Certificates formerly representing
shares of Company Common Stock are presented to the Surviving Corporation,
they shall be canceled and exchanged for shares of Parent Common Stock in
accordance with this Article III.
ARTICLE IV
Representations and Warranties of Parent and Subsidiary
Parent and Subsidiary each represent and warrant to the Company that:
Section 4.1 Organization and Qualification. Each of Parent and Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of Parent and Subsidiary is
qualified to do business and is in good standing in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure
to be so qualified and in good standing will not, when taken together with all
other such failures, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of Parent and its subsidiaries, taken as a whole. True, accurate
and complete copies of each of Parent's and Subsidiary's charters and By-laws,
in each case as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to the Company.
Section 4.2 Capitalization. (a) As of August 10, 1998, the authorized
capital stock of Parent consisted of 1,500,000,000 shares of Parent Common
Stock and 10,000,000 shares of preferred stock, par value $.01 per share
("Parent Preferred Stock"). As of August 10, 1998, (i) 579,687,096 shares of
Parent Common Stock were issued and outstanding, all of which were validly
issued and are fully paid, nonassessable and free of preemptive rights, (ii)
no shares of Parent Preferred Stock were issued and outstanding, (iii) 23,485
shares of Parent Common Stock and no shares of Parent Preferred Stock were
held in the treasury of Parent, (iv) 37,600,799 shares of Parent Common Stock
were reserved for issuance upon exercise of outstanding options and warrants
to purchase Parent Common Stock and (v) 31,552,845 shares of Parent Common
Stock were reserved for issuance upon conversion of outstanding convertible
debentures and outstanding convertible notes. Assuming the conversion of all
outstanding convertible debentures and outstanding convertible notes of Parent
and the exercise of all outstanding options, warrants and rights to purchase
Parent Common Stock, as of August 10, 1998, there would be 648,840,740 shares
of Parent Common Stock issued and outstanding. In addition, as of the date
hereof, no more than 12,373,067 shares of Parent Common Stock were reserved
for issuance in connection with pending acquisitions.
(b) The authorized capital stock of Subsidiary consists of 1,000 shares of
Subsidiary Common Stock, of which 100 shares are issued and outstanding, which
shares are owned beneficially and of record by Parent.
(c) Except as disclosed in the Parent SEC Reports (as defined in Section
4.5) or in Section 4.2(a) or as otherwise contemplated by this Agreement, as
of the date hereof, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating Parent or any subsidiary of Parent
to issue, deliver or sell or repurchase or redeem, or cause to be issued,
delivered or sold, additional shares of the capital stock of Parent or
obligating Parent or any subsidiary of Parent to grant, extend or enter into
any such agreement or commitment. Except as otherwise disclosed in the Parent
SEC Reports, there are no voting trusts, proxies or other agreements or
understandings to which Parent or any subsidiary of Parent is a party or is
bound with respect to the voting of any shares of capital stock of Parent,
other than voting agreements executed in connection with this Agreement. The
shares of Parent Common Stock issued to stockholders of the Company in the
Merger will be at the Effective Time duly authorized, validly issued, fully
paid and nonassessable, free of preemptive rights and will be issued in
compliance with all applicable securities and other laws.
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Section 4.3 Subsidiaries. Each direct and indirect corporate subsidiary of
Parent is duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its
business as it is now being conducted and each subsidiary of Parent is
qualified to do business, and is in good standing, in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except in all
cases where the failure to be so qualified and in good standing would not,
when taken together with all such other failures, have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of Parent and its subsidiaries, taken as a
whole. All of the outstanding shares of capital stock of each corporate
subsidiary of Parent are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned directly or indirectly by Parent, free and
clear of any liens, claims, encumbrances, security interests, equities and
options of any nature whatsoever, except that such shares are pledged to
secure Parent's credit facilities. There are no subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights with respect to
any shares of capital stock of or interest in any subsidiary of Parent,
including any right of conversion or exchange under any outstanding security,
instrument or agreement. As used in this Agreement, the term "subsidiary"
shall mean, when used with reference to any person or entity, any corporation,
partnership, joint venture or other entity of which such person or entity
(either acting alone or together with its other subsidiaries) owns, directly
or indirectly, 50% or more of the stock or other voting interests, the holders
of which are entitled to vote for the election of a majority of the board of
directors or any similar governing body of such corporation, partnership,
joint venture or other entity.
Section 4.4 Authority; Non-Contravention; Approvals. (a) Parent and
Subsidiary each have full corporate power and authority to enter into this
Agreement and, subject to the Parent Required Statutory Approvals (as defined
in Section 4.4(c)), to consummate the transactions contemplated hereby. This
Agreement has been approved by the Boards of Directors of Parent and
Subsidiary and the sole stockholder of Subsidiary, and no other corporate
proceedings on the part of Parent or Subsidiary are necessary to authorize the
execution and delivery of this Agreement or, the consummation by Parent and
Subsidiary of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Subsidiary, and, assuming
the due authorization, execution and delivery hereof by the Company,
constitutes a valid and legally binding agreement of each of Parent and
Subsidiary enforceable against each of them in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) The execution and delivery of this Agreement by each of Parent and
Subsidiary do not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its subsidiaries under any of the terms, conditions
or provisions of (i) the respective charters or by-laws of Parent or any of
its subsidiaries, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to Parent or any of its subsidiaries or any
of their respective properties or assets or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which Parent
or any of its subsidiaries is now a party or by which Parent or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected. The consummation by Parent and Subsidiary of the transactions
contemplated hereby will not result in any violation, conflict, breach,
termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the
Effective Time) the Parent Required Statutory Approvals. Excluded from the
foregoing sentences of this paragraph (b), insofar as they apply to the terms,
conditions or provisions described in clauses (ii) and (iii) of the first
sentence of this paragraph (b) (and whether resulting from such execution and
delivery or consummation),
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are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges or
encumbrances that would not, in the aggregate, have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other) or results of operations of Parent and its subsidiaries, taken as a
whole.
(c) Except for (i) the filings by Parent required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing of the Registration Statement and Proxy Statement/Prospectus (as such
terms are defined in Section 4.9) with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Securities Act of 1933, as amended (the "Securities
Act"), and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities, (iii) the making of the Merger Filing
with the Secretary of State of the State of Delaware in connection with the
Merger, and (iv) any required filings with or approvals from the NYSE,
applicable state environmental authorities, public service commissions and
public utility commissions (the filings and approvals referred to in clauses
(i) through (iv) are collectively referred to as the "Parent Required
Statutory Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the execution and delivery of this
Agreement by Parent or Subsidiary or the consummation by Parent or Subsidiary
of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals which,
if not made or obtained, as the case may be, would not, in the aggregate, have
a material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole.
Section 4.5 Reports and Financial Statements. Since January 1, 1995, Parent
has filed with the SEC all forms, statements, reports and documents (including
all exhibits, post-effective amendments and supplements thereto) required to
be filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed (or, in the case of filing under the
Securities Act, at the time of effectiveness) in all material respects with
all applicable requirements of the appropriate act and the rules and
regulations thereunder. Parent has previously delivered or made available to
the Company copies (including all exhibits, post-effective amendments and
supplements thereto) of its (a) Annual Reports on Form 10-K for the fiscal
year ended December 31, 1997 and for the immediately preceding fiscal year, as
filed with the SEC, (b) proxy and information statements relating to (i) all
meetings of its stockholders (whether annual or special) and (ii) actions by
written consent in lieu of a stockholders' meeting from January 1, 1996, until
the date hereof, and (c) all other reports, including quarterly reports, and
registration statements filed by Parent with the SEC since January 1, 1996
(other than registration statements filed on Form S-8) (the documents referred
to in clauses (a), (b) and (c) filed prior to the date hereof are collectively
referred to as the "Parent SEC Reports"). As of their respective dates (or, in
the case of filing under the Securities Act, at the time of effectiveness),
the Parent SEC Reports did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
of Parent included in the Parent's Annual Report on Form 10-K for the year
ended December 31, 1997 and the unaudited consolidated interim financial
statements included in Parent's Quarterly Report on Form 10-Q for the quarter
ending June 30, 1998 (collectively, the "Parent Financial Statements") have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended (subject, in the case
of unaudited interim financial statements to normal year-end adjustments, none
of which, individually or in the aggregate, would have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of Parent and its subsidiaries, taken as a
whole).
Section 4.6 Absence of Undisclosed Liabilities. Except as disclosed in the
Parent SEC Reports or as heretofore disclosed to the Company in writing with
respect to acquisitions or potential transactions or commitments, neither
Parent nor any of its subsidiaries had at December 31, 1997, or has incurred
since that
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date and as of the date hereof, any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature, except: (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Parent Financial Statements or reflected in the notes thereto
or (ii) which were incurred after December 31, 1997, and were incurred in the
ordinary course of business and consistent with past practices; (b)
liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole or (ii) have been discharged or
paid in full prior to the date hereof; and (c) liabilities and obligations
which are of a nature not required to be reflected in the consolidated
financial statements of Parent and its subsidiaries prepared in accordance
with generally accepted accounting principles consistently applied and which
were incurred in the ordinary course of business.
Section 4.7 Absence of Certain Changes or Events. Since the date of the most
recent Parent SEC Report that contains consolidated financial statements of
Parent, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole, except
for changes that affect the industries in which Parent and its subsidiaries
operate generally.
Section 4.8 Litigation. Except as disclosed in the Parent SEC Reports, there
are no claims, suits, actions or proceedings pending or, to the knowledge of
Parent, threatened against, relating to or affecting Parent or any of its
subsidiaries or any of their respective directors or officers, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seek to restrain or enjoin the consummation
of the Merger or which if adversely determined would reasonably be expected,
either alone or in the aggregate with all such claims, actions or proceedings,
to materially and adversely affect the business, operations, properties,
assets, condition (financial or other) or results of operations of Parent and
its subsidiaries, taken as a whole. Except as set forth in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
which prohibits or restricts the consummation of the transactions contemplated
hereby or would have any material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole.
Section 4.9 Registration Statement and Proxy Statement. None of the
information to be supplied by Parent or its subsidiaries for inclusion in (a)
the Registration Statement on Form S-4, as amended or supplemented from time
to time, to be filed under the Securities Act with the SEC by Parent in
connection with the Merger for the purpose of registering the shares of Parent
Common Stock to be issued in the Merger (such registration statement, together
with any amendments thereof, being the "Registration Statement") or (b) the
proxy statement, as amended or supplemented from time to time, to be
distributed in connection with the Company's meeting of stockholders to vote
upon this Agreement and the transactions contemplated hereby (the "Proxy
Statement" and, together with the prospectus included in the Registration
Statement, the "Proxy Statement/Prospectus") will, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto, and
at the time of the meetings of stockholders of the Company to be held in
connection with the transactions contemplated by this Agreement, or, in the
case of the Registration Statement, as amended or supplemented, at the time it
becomes effective and at the time of such meetings of the stockholders of the
Company and Parent, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Proxy Statement/Prospectus will, as of its
mailing date, comply as to form in all material respects with all applicable
laws, including the provisions of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder, except that no
representation is made by Parent or Subsidiary with respect to information
supplied by the Company or the stockholders of the Company for inclusion
therein.
Section 4.10 Violation of Law. Except as disclosed in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is or at any time since
December 31, 1997, has been in violation of, or has been given notice or
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been charged with any violation of, any law, statute, order, rule, regulation,
ordinance, or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority, except for violations which, in the aggregate, could not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of Parent and its subsidiaries, taken as a whole. Except as
disclosed in the Parent SEC Reports, as of the date of this Agreement, to the
knowledge of Parent, no investigation or review by any governmental or
regulatory body or authority is pending or threatened, nor has any
governmental or regulatory body or authority indicated an intention to conduct
the same, other than, in each case, those the outcome of which, as far as
reasonably can be foreseen, will not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole. Parent
and its subsidiaries have all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole. Parent and its subsidiaries are not in
violation of the terms of any Parent Permit, except for delays in filing
reports or violations which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole.
Section 4.11 Reorganization and Pooling of Interests. To the knowledge of
Parent, none of the Parent, Subsidiary or any of their affiliates has taken or
agreed or intends to take any action or has any knowledge of any fact or
circumstance that would prevent the Merger from (a) constituting a
reorganization within the meaning of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a "pooling of interests" in
accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the SEC (a "Pooling Transaction"). As of
the date hereof, other than directors and officers of Parent, to the knowledge
of Parent, there are no "affiliates" of Parent, as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act.
Section 4.12 Brokers and Finders. Except for the fees and expenses payable
to Donaldson, Lufkin & Jenrette Securities Corporation, which fees are
reflected in its agreement with Parent, Parent has not entered into any
contract, arrangement or understanding with any person or firm which may
result in the obligation of Parent to pay any finder's fees, brokerage or
agent commissions or other like payments in connection with the transactions
contemplated hereby. Except for the fees and expenses paid or payable to
Donaldson, Lufkin & Jenrette Securities Corporation, there is no claim for
payment by Parent of any investment banking fees, finder's fees, brokerage or
agent commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
Section 4.13 Ownership of Company Common Stock. Parent and its subsidiaries
beneficially own an aggregate of 655,000 shares of Company Common Stock as of
the date hereof.
Section 4.14 Subsidiary. Subsidiary was formed solely for the purposes of
engaging in the transactions contemplated hereby, and has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
ARTICLE V
Representations and Warranties of the Company
The Company represents and warrants to Parent and Subsidiary that, except as
set forth in the disclosure schedule dated as of the date hereof and signed by
an authorized officer of the Company (the "Company Disclosure Schedule"), it
being agreed that disclosure of any item on the Company Disclosure Schedule
shall be deemed disclosure with respect to all Sections of this Agreement if
the relevance of such item is apparent from the face of the Company Disclosure
Schedule.
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Section 5.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and in
good standing will not, when taken together with all other such failures, have
a material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole. True, accurate and complete copies of the
Company's Certificate of Incorporation and By-laws, in each case as in effect
on the date hereof, including all amendments thereto, have heretofore been
delivered to Parent.
Section 5.2 Capitalization. (a) The authorized capital stock of the Company
consists of 150,000,000 shares of Company Common Stock and 50,000,000 shares
of preferred stock, par value $.01 per share ("Company Preferred Stock"). As
of August 11, 1998, (i) 36,129,103 shares of Company Common Stock were issued
and outstanding, all of which were validly issued and are fully paid,
nonassessable and free of preemptive rights, and no shares of Company
Preferred Stock were issued and outstanding, (ii) 39,100 shares of Company
Common Stock and no shares of Company Preferred Stock were held in the
treasury of the Company, and (iii) 3,889,846 shares of Company Common Stock
were reserved for issuance upon exercise of warrants and options issued and
outstanding pursuant to the Company's 1997 Stock Option Plan, 1996 Stock
Option Plan and 1991 Stock Option Plan. Assuming the exercise of all
outstanding options, rights and warrants to purchase Company Common Stock, as
of August 11, 1998 there would be 40,018,949 shares of Company Common Stock
issued and outstanding.
(b) Except as disclosed in Section 5.2(b) of the Company Disclosure
Schedule, the Company SEC Reports (as defined in Section 5.5) or in Section
5.2(a), as of the date hereof there were no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other agreement and
also including any rights plan or other anti-takeover agreement, obligating
the Company or any subsidiary of the Company to issue, deliver or sell or
repurchase or redeem, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company or any
subsidiary of the Company to grant, extend or enter into any such agreement or
commitment. Except as disclosed in the Company SEC Reports, there are no
voting trusts, proxies or other agreements or understandings to which the
Company or any subsidiary of the Company is a party or is bound with respect
to the voting of any shares of capital stock of the Company, other than voting
agreements executed in connection with this Agreement.
Section 5.3 Subsidiaries. Each direct and indirect corporate subsidiary of
the Company is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted and each subsidiary of the Company
is qualified to do business, and is in good standing, in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except in all
cases where the failure to be so qualified and in good standing will not, when
taken together with all such other failures, have a material adverse effect on
the business, operations, properties, assets, condition (financial or other)
or results of operations of the Company and its subsidiaries, taken as a
whole. All of the outstanding shares of capital stock of each corporate
subsidiary of the Company are validly issued, fully paid, nonassessable and
free of preemptive rights and are owned directly or indirectly by the Company
free and clear of any liens, claims, encumbrances, security interests,
equities, and options of any nature whatsoever, except that such shares are
pledged to secure the Company's credit facilities. There are no subscriptions,
options, warrants, rights, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights with respect to
any shares of capital stock of or interest in any subsidiary of the Company,
including any right of conversion or exchange under any outstanding security,
instrument or agreement.
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Section 5.4 Authority; Non-Contravention; Approvals. (a) The Company has
full corporate power and authority to enter into this Agreement and, subject
to the Company Stockholders' Approval (as defined in Section 7.3) and the
Company Required Statutory Approvals (as defined in Section 5.4(c)), to
consummate the transactions contemplated hereby. This Agreement has been
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement or, except for the Company
Stockholders' Approval, the consummation by the Company of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Company, and, assuming the due authorization, execution and delivery
hereof by Parent and Subsidiary, constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (b) general
equitable principles. Without limitation of the foregoing, each of the
covenants and obligations of the Company set forth in Sections 6.1, 6.5, 7.1,
7.2, 7.3, 7.6, 7.7, 7.8, 7.10 and 7.12 is valid, legally binding and
enforceable (subject as aforesaid) notwithstanding the absence of the Company
Stockholders' Approval.
(b) Except as disclosed in Section 5.4(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not
violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under any of the terms, conditions or provisions of
(i) the respective charters or by-laws of the Company or any of its
subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to the Company or any of its subsidiaries or
any of their respective properties or assets, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which the Company or any of its subsidiaries is now a party or by which the
Company or any of its subsidiaries or any of their respective properties or
assets may be bound or affected. The consummation by the Company of the
transactions contemplated hereby will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the
Effective Time) the Company Required Statutory Approvals and the Company
Stockholders' Approval and (y) in the case of the terms, conditions or
provisions described in clause (iii) above, to obtaining (prior to the
Effective Time) consents required from commercial lenders, lessors or other
third parties as specified in Section 5.4(b) of the Company Disclosure
Schedule. Excluded from the foregoing sentences of this paragraph (b), insofar
as they apply to the terms, conditions or provisions described in clauses (ii)
and (iii) of the first sentence of this paragraph (b) (and whether resulting
from such execution and delivery or consummation), are such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole.
(c) Except for (i) the filings by the Company required by the HSR Act, (ii)
the filing of the Proxy Statement/Prospectus with the SEC pursuant to the
Exchange Act, (iii) the making of the Merger Filing with the Secretary of
State of the State of Delaware in connection with the Merger and (iv) any
required filings with or approvals from applicable state environmental
authorities, public service commissions or similar governmental regulatory
agencies (e.g. New York Trade Waste Commission) and public utility commissions
(the filings and approvals referred to in clauses (i) through (iv) are
collectively referred to as the "Company Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained,
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as the case may be, would not, in the aggregate, have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of the Company and its subsidiaries, taken
as a whole.
Section 5.5 Reports and Financial Statements. Since January 1, 1995, the
Company has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, post-effective amendments and supplements
thereto) required to be filed by it under each of the Securities Act, the
Exchange Act and the respective rules and regulations thereunder, all of
which, as amended if applicable, complied when filed (or, in the case of
filing under the Securities Act, at the time of effectiveness) in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder, except as disclosed in Section 5.5 of the Company
Disclosure Schedule. The Company has previously delivered or made available to
Parent copies (including all exhibits, post-effective amendments and
supplements thereto) of its (a) Annual Report on Form 10-K for the year ended
June 30, 1997, as filed with the SEC, (b) Transition Report on Form 10-K for
the six months ended December 31, 1997, (c) proxy and information statements
relating to (i) all meetings of its stockholders (whether annual or special)
and (ii) actions by written consent in lieu of a stockholders' meeting from
January 1, 1997, until the date hereof, and (d) all other reports, including
quarterly reports, and registration statements filed by the Company with the
SEC since January 1, 1996 (other than registration statements filed on Form S-
8) (the documents referred to in clauses (a), (b), (c) and (d) filed prior to
the date hereof are collectively referred to as the "Company SEC Reports"). As
of their respective dates (or, in the case of filing under the Securities Act,
at the time of effectiveness), the Company SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The audited
consolidated financial statements of the Company included in the Company's
Transition Report on Form 10-K for the six months ended December 31, 1997
(collectively, the "Company Financial Statements"), have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of the Company and its subsidiaries
as of the dates thereof and the results of their operations and changes in
financial position for the periods then ended.
Section 5.6 Absence of Undisclosed Liabilities. Except as disclosed in
Section 5.6 of the Company Disclosure Schedule, the Company SEC Reports or as
heretofore disclosed to Parent in writing with respect to acquisitions or
potential transactions or commitments, neither the Company nor any of its
subsidiaries had at December 31, 1997, or has incurred since that date and as
of the date hereof, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (a) liabilities, obligations or
contingencies (i) which are accrued or reserved against in the Company
Financial Statements or reflected in the notes thereto or (ii) which were
incurred after December 31, 1997, and were incurred in the ordinary course of
business and consistent with past practices, (b) liabilities, obligations or
contingencies which (i) would not, in the aggregate, have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other) or results of operations of the Company and its subsidiaries, taken
as a whole or (ii) have been discharged or paid in full prior to the date
hereof, and (c) liabilities and obligations which are of a nature not required
to be reflected in the consolidated financial statements of the Company and
its subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied and which were incurred in the ordinary course
of business.
Section 5.7 Absence of Certain Changes or Events. Since the date of the most
recent Company SEC Report that contains consolidated financial statements of
the Company, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole,
except for changes that affect the industries in which the Company and its
subsidiaries operate generally.
Section 5.8 Litigation. Except as referred to in Section 5.8 of the Company
Disclosure Schedule or the Company SEC Reports, there are no claims, suits,
actions or proceedings pending or, to the knowledge of the Company, threatened
against, relating to or affecting the Company or any of its subsidiaries or
any of their
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respective directors or officers, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seek
to restrain the consummation of the Merger or which if adversely determined
would reasonably be expected, either alone or in the aggregate with all such
claims, actions or proceedings, to materially and adversely affect the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole.
Except as referred to in the Company SEC Reports, neither the Company nor any
of its subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator which prohibits or restricts
the consummation of the transactions contemplated hereby or would have any
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole.
Section 5.9 Registration Statement and Proxy Statement. None of the
information to be supplied by the Company or its subsidiaries for inclusion in
(a) the Registration Statement or (b) the Proxy Statement will, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the meetings of stockholders of the Company to be
held in connection with the transactions contemplated by this Agreement or, in
the case of the Registration Statement, as amended or supplemented, at the
time it becomes effective and at the time of such meetings of the stockholders
of the Company, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Proxy Statement/Prospectus will comply, as
of its mailing date, as to form in all material respects with all applicable
laws, including the provisions of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder, except that no
representation is made by the Company with respect to information supplied by
Parent, Subsidiary or any stockholder of Parent for inclusion therein.
Section 5.10 No Violation of Law. Except as disclosed in the Company SEC
Reports, neither the Company nor any of its subsidiaries is or at any time
since December 31, 1997, has been in violation of or has been given notice or
been charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority, except for violations which, in the aggregate, could not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole. Except as
disclosed in the Company SEC Reports, as of the date of this Agreement, to the
knowledge of the Company, no investigation or review by any governmental or
regulatory body or authority is pending or threatened, nor has any
governmental or regulatory body or authority indicated an intention to conduct
the same, other than, in each case, those the outcome of which, as far as
reasonably can be foreseen, will not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole.
The Company and its subsidiaries have all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted
(collectively, the "Company Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole. The Company and its subsidiaries are not in
violation of the terms of any Company Permit, except for delays in filing
reports or violations which, alone or in the aggregate, would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations of the Company and its
subsidiaries, taken as a whole.
Section 5.11 Compliance with Agreements. Except as disclosed in the Company
SEC Reports, the Company and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, would result in a default under, (a) the respective charter,
by-laws or similar organizational instruments of the Company
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or any of its subsidiaries or (b) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which the Company or any of its subsidiaries is a party or
by which any of them is bound or to which any of their property is subject,
other than, in the case of clause (b) of this Section 5.11, breaches,
violations and defaults which would not have, in the aggregate, a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole.
Section 5.12 Taxes. (a) The Company and its subsidiaries have (i) duly filed
with the appropriate governmental authorities all Tax Returns required to be
filed by them for all periods ending on or prior to the Closing Date, other
than those Tax Returns the failure of which to file would not have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, and such Tax Returns are true, correct and
complete in all material respects, and (ii) duly paid in full or made adequate
provision in accordance with generally accepted accounting principles for the
payment of all Taxes for all past and current periods. The liabilities and
reserves for Taxes reflected in the Company balance sheet included in the
latest Company SEC Report to cover all Taxes for all periods ending at or
prior to the date of such balance sheet have been determined in accordance
with generally accepted accounting principles and there is no material
liability for Taxes for any period beginning after such date other than Taxes
arising in the ordinary course of business. There are no material liens for
Taxes upon any property or asset of the Company or any subsidiary thereof,
except for liens for Taxes not yet due or Taxes contested in good faith and
adequately reserved against in accordance with generally accepted accounting
principles. There are no unresolved issues of law or fact arising out of a
notice of deficiency, proposed deficiency or assessment from the Internal
Revenue Service or any other governmental taxing authority with respect to
Taxes of the Company or any of its subsidiaries which, singly or in the
aggregate, would reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or other)
or results of operations of the Company and its subsidiaries, taken as a
whole. Neither the Company nor its subsidiaries has waived any statute of
limitations in respect of a material amount of Taxes or agreed to any
extension of time with respect to a material Tax assessment or deficiency
other than waivers and extensions which are no longer in effect. Neither the
Company nor any of its subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes with any entity that is not, directly or
indirectly, a wholly-owned corporate subsidiary of Company other than
agreements the consequences of which are fully and adequately reserved for in
the Company Financial Statements. Neither the Company nor any of its corporate
subsidiaries has, with regard to any assets or property held, acquired or to
be acquired by any of them, filed a consent to the application of Section
341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
including, without limitation, income, gross receipts, excise, property,
sales, withholding, social security, occupation, use, service, license,
payroll, franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments imposed by the United States, or
any state, local or foreign government or subdivision or agency thereof,
whether computed on a separate, consolidated, unitary, combined or any other
basis, and such term shall include any interest, fines, penalties or
additional amounts and any interest in respect of any additions, fines or
penalties attributable or imposed or with respect to any such taxes, charges,
fees, levies or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean any
return, report or other document required to be supplied to a taxing authority
in connection with Taxes.
Section 5.13 Employee Benefit Plans; ERISA. (a) Except as disclosed in
Section 5.13(a) of the Company Disclosure Schedule or the Company SEC Reports,
at the date hereof, the Company and its subsidiaries do not maintain or
contribute to or have any obligation or liability to or with respect to any
material employee benefit plans, programs, arrangements or practices,
including employee benefit plans within the meaning set forth in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or other similar material arrangements for the provision of benefits
(excluding any "Multi-employer Plan" within the meaning of Section 3(37) of
ERISA or a "Multiple Employer Plan" within the meaning of Section 413(c) of
the Code)
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(such plans, programs, arrangements or practices of the Company and its
subsidiaries being referred to as the "Company Plans"). Section 5.13 of the
Company Disclosure Schedule lists all Multi-employer Plans to which any of
them makes contributions or has any obligation or liability to make material
contributions. Neither the Company nor any of its subsidiaries maintains or
has any material liability with respect to any Multiple Employer Plan. Neither
the Company nor any of its subsidiaries has any obligation to create or
contribute to any additional such plan, program, arrangement or practice or to
amend any such plan, program, arrangement or practice so as to increase
benefits or contributions thereunder, except as required under the terms of
the Company Plans, under existing collective bargaining agreements or to
comply with applicable law.
(b) Except as disclosed in the Company SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Company Plans that could
result in penalties, taxes or liabilities which, singly or in the aggregate,
could have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of operations of the Company
and its subsidiaries, taken as a whole, (ii) except for premiums due, there is
no outstanding material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Company Plans, (iii)
neither the Pension Benefit Guaranty Corporation nor any plan administrator
has instituted proceedings to terminate any of the Company Plans subject to
Title IV of ERISA other than in a "standard termination" described in Section
4041(b) of ERISA, (iv) none of the Company Plans has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal
year of each of the Company Plans ended prior to the date of this Agreement,
(v) the current present value of all projected benefit obligations under each
of the Company Plans which is subject to Title IV of ERISA did not, as of its
latest valuation date, exceed the then current value of the assets of such
plan allocable to such benefit liabilities by more than the amount, if any,
disclosed in the Company SEC Reports as of December 31, 1997, based upon
reasonable actuarial assumptions currently utilized for such Company Plan,
(vi) each of the Company Plans has been operated and administered in
accordance with applicable laws during the period of time covered by the
applicable statute of limitations, except for failures to comply which, singly
or in the aggregate, would not reasonably be expected to have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, (vii) each of the Company Plans which is
intended to be "qualified" within the meaning of Section 401(a) of the Code
has been determined by the Internal Revenue Service to be so qualified and
such determination has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a
failure to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such Company
Plans, and the period for making any such necessary retroactive amendments has
not expired, (viii) with respect to Multi-employer Plans, neither the Company
nor any of its subsidiaries has made or suffered a "complete withdrawal" or a
"partial withdrawal, as such terms are respectively defined in Sections 4203,
4204 and 4205 of ERISA and, to the best knowledge of the Company and its
subsidiaries, no event has occurred or is expected to occur which presents a
material risk of a complete or partial withdrawal under said Sections 4203,
4204 and 4205, (ix) to the best knowledge of the Company and its subsidiaries,
there are no material pending, threatened or anticipated claims involving any
of the Company Plans other than claims for benefits in the ordinary course,
(x) the Company and its subsidiaries have no current material liability under
Title IV of ERISA, and the Company and its subsidiaries do not reasonably
anticipate that any such liability will be asserted against the Company or any
of its subsidiaries, and (xi) no act, omission or transaction (individually or
in the aggregate) has occurred with respect to any Company Plan that has
resulted or could result in any material liability (direct or indirect) of the
Company or any subsidiary under Sections 409 or 502(c) of ERISA or Chapter 43
of Subtitle (A) of the Code. None of the Company Plans has an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code) or is required to provide security to a Company Plan pursuant to Section
401(a)(29) of the Code.
(c) The Company SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
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(d) Except as disclosed in Section 5.13(d) of the Company Disclosure
Schedule, there are no agreements which will or may provide payments to any
current or former officer, employee, stockholder, or highly compensated
individual which will be "parachute payments" under Code Section 280G that
will be nondeductible to the Company or subject to the excise tax imposed
under Code Section 4999.
Section 5.14 Labor Controversies. Except as disclosed in the Company SEC
Reports as of the date hereof, (a) there are no significant controversies
pending or, to the knowledge of the Company, threatened between the Company or
its subsidiaries and any representatives of any of their employees and (b) to
the knowledge of the Company, there are no material organizational efforts
presently being made involving any of the presently unorganized employees of
the Company or its subsidiaries, except for such controversies and
organizational efforts, which, singly or in the aggregate, could not
reasonably be expected to materially and adversely affect the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole.
Section 5.15 Environmental Matters. (a) Except as disclosed in the Company
SEC Reports, (i) the Company and its subsidiaries have conducted their
respective businesses in compliance with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other
approvals and authorizations necessary for the operation of their respective
businesses as presently conducted, (ii) none of the properties owned by the
Company or any of its subsidiaries contain any Hazardous Substance as a result
of any activity of the Company or any of its subsidiaries in amounts exceeding
the levels permitted by applicable Environmental Laws, (iii) since January 1,
1995, neither the Company nor any of its subsidiaries has received any
notices, demand letters or requests for information from any Federal, state,
local or foreign governmental entity indicating that the Company or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, (iv) there are
no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings pending or threatened, against the
Company or any of its subsidiaries relating to any violation, or alleged
violation, of any Environmental Law, (v) no Hazardous Substance has been
disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company or any of its
subsidiaries as a result of any activity of the Company or any of its
subsidiaries during the time such properties were owned, leased or operated by
the Company or any of its subsidiaries, and (vi) neither the Company, its
subsidiaries nor any of their respective properties are subject to any
material liabilities or expenditures (fixed or contingent) relating to any
suit, settlement, court order, administrative order, regulatory requirement,
judgment or claim asserted or arising under any Environmental Law, except for
violations of the foregoing clauses (i) through (vi) that, singly or in the
aggregate, would not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as
a whole.
(b) As used herein, "Environmental Law" means any Federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any
other natural resource) or to human health or safety or (y) the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing Date. The
term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act,
the Federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal Act and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Occupational
Safety and Health Act of 1970, each as amended and as in effect on the Closing
Date, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of,
effects of or exposure to any Hazardous Substance.
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(c) As used herein, "Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental
Law. Hazardous Substance includes any substance to which exposure is regulated
by any government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance,
toxic substance, hazardous waste, special waste, industrial substance or
petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
Section 5.16 Non-Competition Agreements. Except as disclosed in the Company
SEC Reports, neither the Company nor any subsidiary of the Company is a party
to any agreement which (i) purports to restrict or prohibit in any material
respect any of them or any corporation affiliated with any of them from,
directly or indirectly, engaging in any business involving the collection,
interim storage, transfer, recovery, processing, recycling, marketing or
disposal of rubbish, garbage, paper, textile wastes, chemical or hazardous
wastes, liquid and other wastes or any other material business currently
engaged in by Parent or the Company, or any corporations affiliated with
either of them and (ii) would restrict or prohibit Parent or any subsidiary of
the Parent (other than the Company and its subsidiaries that are currently so
restricted or prohibited) from engaging in such business. None of the
Company's officers, directors or key employees is a party to any agreement
which, by virtue of such person's relationship with the Company, restricts in
any material respect the Company or any subsidiary or affiliate of the Company
from, directly or indirectly, engaging in any of the businesses described
above.
Section 5.17 Title to Assets. The Company and each of its subsidiaries has
good and marketable title in fee simple to all its real property and good
title to all its leasehold interests and other properties, as reflected in the
most recent balance sheet included in the Company Financial Statements, except
for properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current taxes, payments of which are not yet
delinquent, (ii) such imperfections in title and easements and encumbrances,
if any, as are not substantial in character, amount or extent and do not
materially detract from the value, or interfere with the present use of the
property subject thereto or affected thereby, or otherwise materially impair
the Company's business operations (in the manner presently carried on by the
Company) or (iii) as disclosed in the Company SEC Reports, and except for such
matters which, singly or in the aggregate, could not reasonably be expected to
materially and adversely affect the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole. All leases under which the Company leases any
real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or
both would become a default other than failures to be in good standing, valid
and effective and defaults under such leases which in the aggregate will not
materially and adversely affect the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole.
Section 5.18 Reorganization and Pooling of Interests. To the knowledge of
the Company, neither the Company nor any of its affiliates has taken or agreed
or intends to take any action or has any knowledge of any fact or circumstance
that would prevent the Merger from (a) constituting a reorganization within
the meaning of Section 368(a) of the Code or (b) being treated for financial
accounting purposes as a Pooling Transaction. As of the date hereof, other
than directors and officers of the Company, to the knowledge of the Company,
there are no "affiliates" of the Company, as that term is used in paragraphs
(c) and (d) of Rule 145 under the Securities Act.
Section 5.19 Company Stockholders' Approval. The affirmative vote of
stockholders of the Company required for approval and adoption of this
Agreement and the Merger is a majority of the outstanding shares of Company
Common Stock entitled to vote thereon.
Section 5.20 Brokers and Finders. Except for the fees and expenses payable
to Salomon Smith Barney, which fees are reflected in its agreement with the
Company, the Company has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
the Company to pay
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any finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby. Except for the fees and
expenses paid or payable to Salomon Smith Barney, there is no claim for
payment by the Company of any investment banking fees, finder's fees,
brokerage or agent commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
Section 5.21 Opinion of Financial Advisor. The financial advisor of the
Company, Salomon Smith Barney, has rendered an opinion to the Board of
Directors of the Company to the effect that, as of the date thereof, the
Exchange Ratio is fair to the holders of Company Common Stock from a financial
point of view; it being understood and acknowledged by Parent and Subsidiary
that such opinion has been rendered for the benefit of the Board of Directors
of the Company and is not intended to, and may not, be relied upon by Parent,
its affiliates or their respective subsidiaries.
ARTICLE VI
Conduct of Business Pending the Merger
Section 6.1 Conduct of Business by the Company Pending the Merger. Except as
otherwise permitted by Section 6.1 of the Company Disclosure Schedule or
otherwise contemplated by this Agreement, after the date hereof and prior to
the Closing Date or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause its
subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charter or by-laws
(except that the Company may amend its charter to increase the number of
authorized shares of Company Common Stock), (ii) split, combine or
reclassify their outstanding capital stock or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions to the
Company by a wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) the Company may issue shares upon
exercise of options and warrants, (ii) the Company may issue shares of
Company Common Stock (or warrants or options to acquire up to an aggregate
of 120,000 shares of Company Common Stock) in connection with acquisitions
of assets or businesses pursuant to the proviso of Section 6.1(d), (iii)
the Company may grant options with an exercise price per share of Company
Common Stock no less than the closing price of a share of Company Common
Stock on the day prior to grant of such option with respect to up to an
aggregate of 100,000 shares of Company Common Stock; provided, however,
that such grants may not be made to any current executive officer or
director of the Company and may only be made in the ordinary course of
business, to employees of the Company and its subsidiaries consistent with
past practice; and (iv) after December 31, 1998, the Company may issue
options to executive officers and directors in an amount consistent with
past practice and after delivery to Parent of a letter from Ernst & Young
LLP in a form reasonably satisfactory to Parent to the effect that the
issuance of such options would not prevent the Merger from being treated as
a "pooling of interests" for financial accounting purposes.
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business (other than pursuant to credit facilities) or borrowings
under the existing credit facilities of the Company or any of its
subsidiaries as such facilities may be amended in a manner that does not
have a material adverse effect on the Company (the "Existing Credit
Facilities") up to the existing borrowing limit on the date hereof or
extensions of the Existing Credit Facilities to finance acquisitions
pursuant to the proviso of this Section 6.1(d), (B) borrowings to refinance
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existing indebtedness on terms which are reasonably acceptable to Parent,
(C) assumption of loans of certain leases of equipment in connection with
acquisitions or rollovers of certain leases of equipment in the ordinary
course of business consistent with past practice in amount or (D)
borrowings in connection with acquisitions as set forth in the proviso in
this Section 6.1(d), (ii) redeem, purchase, acquire or offer to purchase or
acquire any shares of its capital stock or any options, warrants or rights
to acquire any of its capital stock or any security convertible into or
exchangeable for its capital stock, (iii) notwithstanding any other
provision of this Section 6.1, take any action that would jeopardize the
treatment of the Merger as a pooling of interests under Opinion No. 16 of
the Accounting Principles Board ("APB No. 16"), (iv) notwithstanding any
other provision of this Section 6.1, take or fail to take any action which
action or failure to take action would cause the Company or its
stockholders (except to the extent that any stockholders receive cash in
lieu of fractional shares and except to the extent of Stockholders in
special circumstances) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger or would otherwise
cause the Merger not to qualify as a reorganization under Section 368(a) of
the Code, (v) make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of business and
expenditures for fixed or capital assets in the ordinary course of business
and other than as set forth in the proviso in this Section 6.1(d), (vi)
sell, pledge, dispose of or encumber any material assets or businesses
other than (a) sales of businesses or assets in the ordinary course of
business, (b) sales of businesses or assets disclosed in Section 6.1 of the
Company Disclosure Schedule, (c) sales of businesses or assets with
aggregate 1997 revenues less than $5.0 million, and (d) pledges or
encumbrances pursuant to Existing Credit Facilities or other permitted
borrowings, or (vii) except as contemplated by the following proviso, enter
into any binding contract, agreement, commitment or arrangement with
respect to any of the foregoing; provided, however, that notwithstanding
the foregoing (other than subsections (iii) and (iv) of this Section
6.1(d)), the Company shall not be prohibited from acquiring any assets or
businesses or incurring or assuming indebtedness in connection with
acquisitions of assets or businesses so long as (A) such acquisitions are
disclosed in Section 6.1 of the Company Disclosure Schedule, or (B) the
aggregate revenue projected to be earned from acquisitions (other than
those acquisitions disclosed in Section 6.1 of the Company Disclosure
Schedule) for the twelve months following each acquisition does not exceed
$150 million prior to December 31, 1998 or $250 million thereafter, and the
aggregate value of consideration paid or payable for any one such
acquisition (other than those acquisitions disclosed in Section 6.1 of the
Company Disclosure Schedule), including any funded indebtedness assumed and
any Company Common Stock issued in connection with such acquisition (valued
for purposes of this limitation at a price per share equal to the price of
the Company Common Stock on the date the agreement in respect of such
acquisition is entered into) does not exceed $60 million. For purposes of
the foregoing, any contingent, royalty and similar payments made in
connection with acquisitions of businesses or assets shall be included as
acquisition consideration and shall be deemed to have a value equal to
their present value assuming an 8% per annum discount rate and assuming
that all amounts payable for the first five years following consummation of
the acquisitions (but not thereafter) are paid. Notwithstanding anything
herein to the contrary (A) the Company will not acquire or agree to acquire
any assets or businesses if such acquisition or agreement may reasonably be
expected to delay the consummation of the Merger, (B) the Company will not
acquire or agree to acquire any assets or businesses if such assets or
businesses are not in industries in which the Company currently operates,
unless such assets or businesses are acquired incidental to an acquisition
of businesses or assets that are in industries in which the Company
currently operates and it is reasonable to acquire such incidental
businesses or assets in connection with such acquisition, and (C) the
Company will not acquire or agree to acquire all or substantially all of
the business, assets, properties or capital stock of any entity with
securities registered under the Securities Act or the Exchange Act;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them;
(f) subject to restrictions imposed by applicable law, confer with one or
more representatives of Parent to report operational matters of materiality
and the general status of ongoing operations;
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(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course of business and consistent with past
practice; provided, however, that the Company and its subsidiaries shall in
no event enter into or amend any written employment agreement providing for
annual base salary in excess of $75,000 per annum, except for employment
agreements entered into with the sellers of businesses acquired in
accordance with this Agreement;
(h) not adopt, enter into or amend any pension or retirement plan, trust
or fund, except as required to comply with changes in applicable law and
not adopt, enter into or amend in any material respect any bonus, profit
sharing, compensation, stock option, deferred compensation, health care,
employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employees or retirees
generally, other than in the ordinary course of business, except (i) as
contemplated by Section 6.1(c), (ii) as required to comply with changes in
applicable law, (iii) to increase the number of shares of Company Common
Stock available for grant or award under the Company's 1997 Stock Option
Plan, 1996 Stock Option Plan, 1991 Stock Option Plan and the 1988 Employee
Stock Bonus Plan, (iv) any of the foregoing involving any such then
existing plans, agreements, trusts, funds or arrangements of any company
acquired after the date hereof or (v) as required pursuant to an existing
contractual arrangement or agreement;
(i) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice;
(j) not make, change or revoke any material Tax election or make any
material agreement or settlement regarding Taxes with any taxing authority;
and
(k) not change its accounting principles or practices other than as
required by United States generally accepted accounting principles.
Section 6.2 Conduct of Business by Parent and Subsidiary Pending the Merger.
Except as otherwise contemplated by this Agreement, after the date hereof and
prior to the Closing Date or earlier termination of this Agreement, unless the
Company shall otherwise agree in writing, Parent shall, and shall cause its
subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charter (except
for any amendments by Parent of its Certificate of Incorporation to
increase the number of authorized shares of Parent Common Stock so as to be
able to consummate the Merger) or by-laws, (ii) split, combine or
reclassify (whether by stock dividend or otherwise) their outstanding
capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of quarterly cash dividends, or dividends or distributions to
Parent by a wholly-owned subsidiary of Parent;
(c) not (i) take any action that would jeopardize the treatment of the
Merger as a pooling of interests under APB No. 16, (ii) take or fail to
take any action which action or failure to take action would cause Parent
or its stockholders to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger or would otherwise
cause the Merger not to qualify as a reorganization under Section 368(a) of
the Code;
(d) not intentionally delist the Parent Common Stock from trading on the
NYSE; and
(e) not change its accounting principles or practices other than as
required by United States generally accepted accounting principles.
Section 6.3 Control of the Company's Operations. Nothing contained in this
Agreement shall give to Parent, directly or indirectly, rights to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
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Section 6.4 Control of Parent's Operations. Nothing contained in this
Agreement shall give to the Company, directly or indirectly, rights to control
or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, Parent shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
Section 6.5 Acquisition Transactions. (a) After the date hereof and prior to
the Effective Time or earlier termination of this Agreement, the Company shall
not, and shall not permit any of its subsidiaries to, initiate, solicit,
negotiate, encourage or provide confidential information to facilitate, and
the Company shall, and shall use its reasonable efforts to cause any officer,
director or employee of the Company, or any attorney, accountant, investment
banker, financial advisor or other agent retained by it or any of its
subsidiaries, not to initiate, solicit, negotiate, encourage or provide
nonpublic or confidential information to facilitate, any proposal or offer to
acquire all or any substantial part of the business or properties of the
Company or any capital stock of the Company, whether by merger, purchase of
assets, tender offer or otherwise, (other than a transaction permitted
pursuant to Section 6.1(d)) whether for cash, securities or any other
consideration or combination thereof (any such transactions being referred to
herein as an "Acquisition Transaction").
(b) Notwithstanding the provisions of paragraph (a) above, (i) the Company
may, in response to an unsolicited written offer or proposal with respect to a
potential or proposed Acquisition Transaction ("Acquisition Proposal") which
the Company's Board of Directors determines, in good faith and after
consultation with its independent financial advisor, could result (if
consummated pursuant to its terms) in an Acquisition Transaction more
favorable to the Company's stockholders than the Merger (any such offer or
proposal being referred to as a "Superior Proposal"), furnish (subject to the
execution of a confidentiality agreement substantially similar to the
confidentiality provisions of this Agreement), confidential or nonpublic
information to a financially capable corporation, partnership, person or other
entity or group (a "Potential Acquirer") and negotiate with such Potential
Acquirer if the Board of Directors of the Company, after consulting with its
outside legal counsel, determines in good faith that the failure to provide
such confidential or nonpublic information to or negotiate with such Potential
Acquirer would be reasonably likely to constitute a breach of its fiduciary
duty to the Company's stockholders and (ii) the Company's Board of Directors
may take and disclose to the Company's stockholders a position contemplated by
Rule 14e-2 under the Exchange Act. It is understood and agreed that
negotiations and other activities conducted in accordance with this paragraph
(b) shall not constitute a violation of paragraph (a) of this Section 6.5.
(c) The Company shall promptly (but in any event within 48 hours) notify
Parent after receipt of any Acquisition Proposal, indication of interest or
request for nonpublic information relating to the Company or its subsidiaries
in connection with an Acquisition Proposal or for access to the properties,
books or records of the Company or any subsidiary by any person or entity that
informs the Board of Directors of the Company or such subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such notice to
Parent shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact.
ARTICLE VII
Additional Agreements
Section 7.1 Access to Information. (a) Subject to applicable law, the
Company and its subsidiaries shall afford to Parent and Subsidiary and their
respective accountants, counsel, financial advisors and other representatives
(the "Parent Representatives") and Parent and its subsidiaries shall afford to
the Company and its accountants, counsel, financial advisors and other
representatives (the "Company Representatives") reasonable access during
normal business hours with reasonable notice throughout the period prior to
the Effective Time to all of their respective properties, books, contracts,
commitments and records (including, but not limited to, Tax Returns) and,
during such period, shall furnish promptly to one another (i) a copy of each
report, schedule and other document filed or received by any of them pursuant
to the requirements of federal or
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state securities laws or filed by any of them with the SEC and (ii) such other
information concerning their respective businesses, properties and personnel
as Parent or Subsidiary or the Company, as the case may be, shall reasonably
request; provided, however, that no investigation pursuant to this Section 7.1
shall amend or modify any representations or warranties made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. Parent and its subsidiaries shall hold and shall use their reasonable
best efforts to cause the Parent Representatives to hold, and the Company and
its subsidiaries shall hold and shall use their reasonable best efforts to
cause the Company Representatives to hold, in strict confidence all nonpublic
documents and information furnished to Parent and Subsidiary or to the
Company, as the case may be, in connection with the transactions contemplated
by this Agreement, except that (i) Parent, Subsidiary and the Company may
disclose such information as may be necessary in connection with seeking the
Parent Required Statutory Approvals and Parent Stockholders' Approval, the
Company Required Statutory Approvals and the Company Stockholders' Approval
and (ii) each of Parent, Subsidiary and the Company may disclose any
information that it is required by law or judicial or administrative order to
disclose.
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver to the other all nonpublic written
material provided pursuant to this Section 7.1 and shall not retain any
copies, extracts or other reproductions in whole or in part of such written
material. In such event, all documents, memoranda, notes and other writings
prepared by Parent or the Company based on the information in such material
shall be destroyed (and Parent and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy their documents, memoranda and notes), and such destruction
(and reasonable best efforts) shall be certified in writing by an authorized
officer supervising such destruction.
Section 7.2 Registration Statement and Proxy Statement. Parent and the
Company shall file with the SEC as soon as is reasonably practicable after the
date hereof the Registration Statement and shall use all reasonable efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable. Parent shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with the issuance
of Parent Common Stock pursuant hereto. Parent and the Company shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with any action by any of them in
connection with the preceding sentence. The information provided and to be
provided by Parent and the Company, respectively, for use in the Proxy
Statement/Prospectus shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
Section 7.3 Stockholders' Approvals. Subject to the fiduciary duties of the
Board of Directors of the Company under applicable law and to the terms of
this Agreement, the Company shall, as promptly as practicable, submit this
Agreement and the transactions contemplated hereby for the approval of its
stockholders at a meeting of stockholders and shall use its reasonable best
efforts to obtain stockholder approval and adoption (the "Company
Stockholders' Approval") of this Agreement and the transactions contemplated
hereby. Subject to the fiduciary duties of the Board of Directors of the
Company under applicable law and to the terms of this Agreement, such meeting
of stockholders shall be held as soon as practicable following the date upon
which the Registration Statement becomes effective. Subject to the fiduciary
duties of the Board of Directors of the Company under applicable law and to
the terms of this Agreement, the Company shall, through its Board of
Directors, recommend to its stockholders approval of the transactions
contemplated by this Agreement.
Section 7.4 Compliance with the Securities Act. Parent and the Company shall
each use its commercially reasonable efforts to cause each officer, each
director and each other person who is an "affiliate," as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act, of Parent or the
Company, as the case may be, to deliver to Parent and the Company on or prior
to the Effective Time a written agreement (an "Affiliate Agreement") to the
effect that such person will not offer to sell, sell or otherwise dispose of
any shares of Parent Common Stock issued in the Merger, except, in each case,
pursuant to an effective registration statement or in compliance with Rule
145, as amended from time to time, or in a transaction which, in the opinion
of legal
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counsel satisfactory to Parent, is exempt from the registration requirements
of the Securities Act and, in any case, until after the results covering 30
days of post-Merger combined operations of Parent and the Company have been
filed with the SEC, sent to stockholders of Parent or otherwise publicly
issued.
Section 7.5 Exchange Listing. Parent shall use its reasonable best efforts
to effect, at or before the Effective Time, authorization for listing on the
NYSE, upon official notice of issuance, of the shares of Parent Common Stock
to be issued pursuant to the Merger or to be reserved for issuance upon
exercise of stock options or warrants.
Section 7.6 Expenses and Fees. (a) All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing the Proxy Statement/Prospectus
shall be shared equally by Parent and the Company.
(b) The Company agrees to pay to Parent a fee equal to $35 million if:
(i) the Company terminates this Agreement pursuant to clause (iv) or (v)
of Section 9.1(a);
(ii) Parent terminates this Agreement pursuant to clause (iv) of Section
9.1(b); or
(iii) (A) Parent terminates this Agreement pursuant to clause (vi) of
Section 9.1(b); (B) prior to the time of such termination a proposal
relating to a Acquisition Transaction had been made; and (C) on or prior to
the six month anniversary of the termination of this Agreement the Company
or any of its subsidiaries or affiliates (x) enters into an agreement or
letter of intent (or if the Company's Board of Directors resolves or
announces an intention to do) with respect to any Business Combination with
any person, entity or group or (y) consummates any Business Combination
with any person, entity or group.
For purposes of this Section 7.6, "Business Combination" means (i) a merger,
consolidation, share exchange, business combination or similar transaction
involving the Company as a result of which the Company stockholders prior to
such transaction in the aggregate cease to own at least 70% of the voting
securities of the entity surviving or resulting from such transaction (or the
ultimate parent entity thereof), (ii) a sale, lease, exchange, transfer or
other disposition of more than 30% of the assets of the Company and its
subsidiaries, taken as a whole, in a single transaction or a series of related
transactions, or (iii) the acquisition, by a person (other than Parent or any
affiliate thereof), group or entity of beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of more than 30% of the Company Common
Stock whether by tender or exchange offer or otherwise.
Section 7.7 Agreement to Cooperate. (a) Subject to the terms and conditions
herein provided and subject to the fiduciary duties of the respective boards
of directors of the Company and Parent, each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable efforts to
obtain all necessary or appropriate waivers, consents or approvals of third
parties required in order to preserve material contractual relationships of
Parent and the Company and their respective subsidiaries, all necessary or
appropriate waivers, consents and approvals and SEC "no-action" letters to
effect all necessary registrations, filings and submissions and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed
with the Merger as expeditiously as possible).
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable, and in any event prior
to 15 days after the date hereof, a Notification and Report Form under the HSR
Act with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division"). Each of Parent and
the Company shall (i) respond as promptly as practicable to any inquiries
received from the FTC or the Antitrust Division for additional information or
documentation and to all inquiries and requests received from any State
Attorney General or other governmental authority in connection with antitrust
matters and (ii) not extend any waiting period under the HSR Act or enter into
any
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agreement with the FTC or the Antitrust Division not to consummate the
transactions contemplated by this Agreement, except with the prior written
consent of the other parties hereto. Parent shall take all reasonable steps
necessary to avoid or eliminate impediments under any antitrust, competition,
or trade regulation law that may be asserted by the FTC, the Antitrust
Division, any State Attorney General or any other governmental entity with
respect to the Merger so as to enable the Closing to occur as soon as
reasonably possible. Without limiting the foregoing, Parent shall propose,
negotiate, commit to and effect, by consent decree, hold separate order, or
otherwise, the sale, divestiture or disposition of such assets or businesses
of Parent or, effective as of the Effective Time, the Surviving Corporation as
may be required in order to avoid the entry of, or to effect the dissolution
of, any injunction, temporary restraining order or other order in any suit or
proceeding, which would otherwise have the effect of preventing or delaying
the Closing; provided, however, that Parent shall not be required to take any
such actions if such action would be reasonably likely, in the aggregate, to
have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of operations of the Company
and its subsidiaries taken as a whole, in the case of a sale divestiture,
holding separate or other disposition of assets of the Company or its
subsidiaries, or, in the case of a sale, divestiture, holding separate or
other disposition of assets of the Parent or its subsidiaries, such action
with respect to a comparable amount of assets of the Company would be
reasonably likely, in the aggregate, to have such a material adverse effect.
Parent or the Company, as applicable, shall take promptly, in the event that
any permanent or preliminary injunction or other order is entered or becomes
reasonably foreseeable to be entered in any proceeding that would make
consummation of the transactions contemplated hereby in accordance with the
terms of this Agreement unlawful or that would prevent or delay consummation
of the transactions contemplated hereby, any and all steps necessary to
vacate, modify or suspend such injunction or order so as to permit such
consummation prior to the deadline specified in Section 9.1(a)(ii) or Section
9.1(b)(ii). The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or in behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or any other
federal, state or foreign antitrust or fair trade law. The parties hereto will
provide to the other copies of all correspondence between it (or its advisors)
and the FTC, the Antitrust Division or any State Attorney General relating to
this Agreement or any of the matters described in this Section 7.7(b). The
parties hereto agree that all material telephonic calls and meetings with the
FTC, the Antitrust Division or any State Attorney General regarding the
transactions contemplated hereby or any of the matters described in this
Section 7.7(b) shall include representatives of each of Parent and the
Company. Parent shall coordinate and be the principal spokesperson in
connection with any proceedings or negotiations with any governmental entity
relating to any of the foregoing, provided that it shall afford the Company a
reasonable opportunity to participate therein.
(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, or any
Acquisition Transaction, Parent shall have the right, at its own expense, to
participate therein, and the Company will not settle any such litigation
without the consent of Parent, which consent will not be unreasonably
withheld.
Section 7.8 Public Statements. The parties shall consult with each other
prior to issuing any press release or any written public statement with
respect to this Agreement or the transactions contemplated hereby and shall
not issue any such press release or written public statement prior to such
consultation.
Section 7.9 Option Plans. (a) The Company shall use commercially reasonable
efforts and shall take all necessary actions, including but not limited to
obtaining the consent of the option holders, if necessary, to ensure that, at
the Effective Time, all rights with respect to the Company Common Stock
pursuant to each stock option ("Company Options") granted under stock option
plans of the Company or otherwise which is outstanding on the Effective Date,
whether or not such Company Option has previously vested or become
exercisable, shall be cancelled in exchange for a number of shares of Parent
Common Stock equal in market value (based upon the average of the closing
prices of the Parent Common Stock on the NYSE for the 10 trading days
immediately prior to the Closing Date) to the fair value of such Company
Option as determined by independent third party
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experts, mutually agreed upon by Parent and the Company. The parties hereto
have agreed that the value determined using the methodology proposed by such
independent third party experts will represent the fair value of the Company
Options as of the Effective Time.
(b) At the Effective Time, automatically and without any action on the part
of the holder thereof, each outstanding Company Option that was not canceled
in accordance with Section 7.9(a) above shall be assumed by Parent and become
an option to purchase that number of shares of Parent Common Stock obtained by
multiplying the number of shares of Company Common Stock issuable upon the
exercise of such option by the Exchange Ratio at an exercise price per share
equal to the per share exercise price of such option divided by the Exchange
Ratio, and otherwise upon the same terms and conditions as such outstanding
Company Options; provided, however, that in the case of any Company Option to
which Section 421 of the Code applies by reason of the qualifications under
Section 422 or 423 of such Code, the exercise price, the number of shares
purchasable pursuant to such Company Option be determined in order to comply
with Section 424(a) of the Code.
(c) Parent shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of the Company Options assumed by Parent, if any, pursuant to
Section 7.9(b) above.
(d) As promptly as practicable after the Effective Time, Parent shall file a
Registration Statement on Form S-8 (or any successor or other appropriate
forms) with respect to the shares of Parent Common Stock subject to the
Company Options and shall use its reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such Company Options remain outstanding.
(e) Except as provided herein or as otherwise agreed to by the parties, each
of the Company stock option plans providing for the issuance or grant of
Company Options shall be assumed as of the Effective Time by Parent with such
amendments thereto as may be required to reflect the Merger.
Section 7.10 Notification of Certain Matters. Each of the Company, Parent
and Subsidiary agrees to give prompt notice to each other of, and to use
commercially reasonable efforts to remedy, (i) the occurrence or failure to
occur of any event which occurrence or failure to occur would be likely to
cause any of its representations or warranties in this Agreement to be untrue
or inaccurate in any material respect at the Effective Time and (ii) any
material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 7.10 shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 7.11 Directors' and Officers' Indemnification. (a) The
indemnification provisions of the Certificate of Incorporation and By-Laws of
the Surviving Corporation as in effect at the Effective Time shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees
or agents of the Company. Parent shall assume, be jointly and severally liable
for, and honor, guaranty and stand surety for, and shall cause the Surviving
Corporation to honor, in accordance with their respective terms each of the
covenants contained in this Section 7.11 and each of the indemnification
agreements listed on Section 7.11 of the Company Disclosure Schedule without
limit as to time; provided, however, in the event of a conflict between the
provisions of this Section 7.11 and the provisions of an indemnification
agreement listed on Section 7.11 of the Company Disclosure Schedule, the
provisions of such indemnification agreement shall govern.
(b) After the Effective Time, each of Parent and the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and
hold harmless, each present and former director, officer, employee and agent
of the Company or any of its subsidiaries (each, together with such person's
heirs, executors or administrators, an "indemnified Party" and collectively,
the "indemnified Parties") against any costs or expenses (including attorneys
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in
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settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with any action or
omission occurring or alleged to occur prior to the Effective Time (including,
without limitation, acts or omissions in connection with this Agreement and
the consummation of transactions contemplated hereunder and acts or omissions
in connection with such persons serving as an officer, director or other
fiduciary in any entity if such service was at the request or for the benefit
of the Company) or arising out of or pertaining to the transactions
contemplated by this Agreement. In the event of any such actual or threatened
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) the Company or Parent and the Surviving
Corporation, as the case may be, shall pay the reasonable fees and expenses of
counsel selected by the indemnified Parties, which counsel shall be reasonably
satisfactory to the Parent and the Surviving Corporation, promptly after
statements therefor are received and shall pay all other reasonable expenses
in advance of the final disposition of such action, (ii) the Parent and the
Surviving Corporation will cooperate and use all reasonable efforts to assist
in the vigorous defense of any such matter, and (iii) to the extent any
determination is required to be made with respect to whether an indemnified
Party's conduct complies with the standards set forth under the DGCL and the
Parent's or the Surviving Corporation's respective charters or by-laws such
determination shall be made by independent legal counsel acceptable to the
Parent or the Surviving Corporation, as the case may be, and the indemnified
Party; provided, however, that neither the Parent nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld) and provided
further that if Parent or the Surviving Corporation advances or pays any
amount to any person under this paragraph (b) and if it shall thereafter be
finally determined by a court of competent jurisdiction that such person was
not entitled to be indemnified hereunder for all or any portion of such
amount, to the extent required by law, such person shall repay such amount or
such portion thereof, as the case may be, to Parent or the Surviving
Corporation, as the case may be. The indemnified Parties as a group may not
retain more than one law firm to represent them with respect to each matter
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
indemnified Parties.
(c) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations of the Surviving
Corporation or the Parent, as the case may be, as set forth in this Section
7.11.
(d) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous to the
indemnified Parties and which coverages and amounts shall be no less than the
coverages and amounts provided at that time for Parent's directors and
officers provided that there shall be no lapse of coverage) with respect to
matters arising on or before the Effective Time and acts or omissions in
connection with this Agreement and the consummation of the transactions
contemplated hereunder.
(e) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any indemnified Party in enforcing
the indemnity and other obligations provided in this Section 7.11.
(f) The rights of each indemnified Party hereunder shall be in addition to,
and not in limitation of, any other rights such indemnified Party may have
under the charter or bylaws of the Company, any indemnification agreement,
under the DGCL or otherwise. The provisions of this Section 7.11 shall survive
the consummation of the Merger and expressly are intended to benefit each of
the indemnified Parties.
Section 7.12 Corrections to the Proxy Statement/Prospectus and Registration
Statement. Prior to the date of approval of the Merger by their respective
stockholders, each of the Company, Parent and Subsidiary shall correct
promptly any information provided by it to be used specifically in the Proxy
Statement/Prospectus and
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Registration Statement that shall have become false or misleading in any
material respect and shall take all steps necessary to file with the SEC and
have declared effective or cleared by the SEC any amendment or supplement to
the Proxy Statement/Prospectus or the Registration Statement so as to correct
the same and to cause the Proxy Statement/Prospectus as so corrected to be
disseminated to the stockholders of the Company and Parent, in each case to
the extent required by applicable law.
Section 7.13. Assumption of Registration Rights Agreements. The Company will
use reasonable best efforts to ensure that Parent and Subsidiary shall have no
obligation to register any securities of the Surviving Corporation after the
Effective Time.
Section 7.14. Company Employees. Prior to the Effective Time, neither Parent
nor any subsidiary of Parent or any affiliate of Parent or any of its
subsidiaries shall offer to employ or employ any salaried managerial or
professional employee of Company or any of its subsidiaries, if such
employment would begin prior to the Effective Time, without the prior written
consent of Company.
ARTICLE VIII
Conditions
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of the
Company under applicable law and applicable listing requirements;
(b) the shares of Parent Common Stock issuable in the Merger and those to
be reserved for issuance upon exercise of stock options or warrants shall
have been authorized for listing on the NYSE upon official notice of
issuance;
(c) the waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated;
(d) the Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending
such effectiveness shall have been issued and remain in effect and no
proceeding for that purpose shall have been instituted by the SEC or any
state regulatory authorities;
(e) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable efforts to have any such injunction, order or decree lifted);
(f) no statute, rule or regulation shall have been enacted by any state
or federal government or governmental agency in the United States which
would prevent the consummation of the Merger or make the Merger illegal;
(g) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the
Effective Time, except where the failure to obtain the same would not be
reasonably likely, individually or in the aggregate, to have a material
adverse effect on the business, operations, properties, assets,
liabilities, condition (financial or other) or results of operations of the
Company and its subsidiaries, taken as a whole, following the Effective
Time;
(h) the certified public accountants for Parent, shall have delivered a
letter, dated the Closing Date, addressed to Parent, in form and substance
reasonably satisfactory to Parent, to the effect that the Merger will
qualify for a pooling of interests accounting treatment if consummated in
accordance with this Agreement; and
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(i) each of the parties to the Agreement shall have received a letter
dated the Closing Date, addressed to the Company, from Ernst & Young LLP
regarding such firm's concurrence with the Company's management's
conclusions that no conditions exist related to the Company that would
preclude the Parent's accounting for the Merger with the Company as a
pooling of interests under Accounting Principles Board Opinion No. 16 if
closed and consummated in accordance with this Agreement.
Section 8.2 Conditions to Obligation of the Company to Effect the Merger.
Unless waived by the Company, the obligation of the Company to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following additional conditions:
(a) Parent and Subsidiary shall have performed their agreements contained
in this Agreement required to be performed on or prior to the Closing Date
and the representations and warranties of Parent and Subsidiary contained
in this Agreement shall be true and correct on and as of the date made and
(except to the extent that such representations and warranties speak as of
an earlier date) on and as of the Closing Date as if made at and as of such
date except for such failures to perform or to be true and correct that
have not and would not, in the aggregate, reasonably be expected to have a
material adverse effect on the business operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries considered as a whole (except for representations and
warranties that contain materiality or material adverse effect
qualifications which representations and warranties shall be true and
correct in all respects), and the Company shall have received a certificate
of the Chairman of the Board and Chief Executive Officer, the President or
a Vice President of Parent and of the President and Chief Executive Officer
or a Vice President of Subsidiary to that effect;
(b) the Company shall have received an opinion of Drinker Biddle & Reath
LLP, in form and substance reasonably satisfactory to the Company, dated
the Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, which are
consistent with the state of facts existing at the Effective Time: (i) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, (ii) no gain or loss will be recognized by Parent, the
Company or Subsidiary as a result of the Merger, and (iii) no gain or loss
will be recognized by the holders of Company Common Stock upon the exchange
of their Company Common Stock solely for shares of Parent Common Stock
(except with respect to cash received in lieu of fractional shares of
Parent Common Stock). In rendering such opinion, such counsel may rely upon
representations contained in certificates of officers and certain
stockholders of Parent, the Company and Subsidiary.
Section 8.3 Conditions to Obligations of Parent and Subsidiary to Effect the
Merger. Unless waived by Parent and Subsidiary, the obligations of Parent and
Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of the Company contained in this Agreement
shall be true and correct on and as of the date made and (except to the
extent that such representations and warranties speak as of an earlier
date) on and as of the Closing Date as if made at and as of such date,
except for such failures to perform and to be true and correct that have
not and would not, in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of the Company and
its subsidiaries considered as a whole (except for representations and
warranties that contain materiality or material adverse effect
qualifications which representations and warranties shall be true and
correct in all respects), and Parent shall have received a Certificate of
the President and Chief Executive Officer or of a Vice President of the
Company to that effect;
(b) Parent shall have received an opinion of Shearman & Sterling, in form
and substance reasonably satisfactory to Parent, dated the Closing Date,
substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, which are consistent with the
state of facts, existing at the Effective Time: (i) the Merger will
constitute a reorganization within the meaning of Section
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368 of the Code and (ii) Parent and Subsidiary will recognize no gain or
loss for federal income tax purposes as a result of consummation of the
Merger. In rendering such opinion, such counsel may rely upon
representations contained in certificates of officers and certain
stockholders of Parent, the Company and Subsidiary; and
(c) all consents, approvals or waivers from the Company's lenders
required to consummate the Merger, shall have been obtained and be in
effect at the Effective Time, except where the failure to obtain the same
would not be reasonably likely, individually or in the aggregate, to have a
material adverse effect on the business, operations, properties, assets,
liabilities, condition (financial or other) or results of operations of the
Company and its subsidiaries, taken as a whole, following the Effective
Time.
ARTICLE IX
Termination, Amendment and Waiver
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the stockholders of
the Company or Parent, by the mutual written consent of the Company and Parent
or as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) upon a material breach of a representation or warranty of Parent
contained in this Agreement which has not been cured in all material
respects and which has caused any of the conditions set forth in
section 8.2(a) to be incapable of being satisfied by the Termination
Date;
(ii) if the Merger is not completed by March 31, 1999 (the
"Termination Date") (unless due to a delay or default on the part of
the Company);
(iii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of the Company and if
the Company shall have used reasonable efforts to prevent the entry of
such order;
(iv) if the Company receives a Superior Proposal, resolves to accept
such Superior Proposal, and the Company shall have given Parent two
days' prior written notice of its intention to terminate pursuant to
this provision; provided, however, that such termination shall not be
effective until such time as the payment required by Section 7.6(b)
shall have been received by Parent;
(v) if (A) a tender or exchange offer is commenced by a Potential
Acquirer (excluding any affiliate of the Company or any group of which
any affiliate of the Company is a member) for all outstanding shares of
Company Common Stock, (B) the Company's Board of Directors determines,
in good faith and after consultation with an independent financial
advisor, that such offer constitutes a Superior Proposal and resolves
to accept such Superior Proposal or recommend to the stockholders that
they tender their shares in such tender or exchange offer and (C) the
Company shall have given Parent two days' prior written notice of its
intention to terminate pursuant to this provision; provided, however,
that such termination shall not be effective until such time as the
payment required by Section 7.6(b) shall have been received by Parent;
or
(vi) if Parent (A) fails to perform in any material respect any of
its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after written notice of
such default specifying such default in reasonable detail is given to
Parent by the Company.
(b) Parent shall have the right to terminate this Agreement:
(i) upon a material breach of a representation or warranty of the
Company contained in this Agreement which has not been cured in all
material respects and which has caused any of the conditions set forth
in Section 8.3(a) to be incapable of being satisfied by the Termination
Date;
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(ii) if the Merger is not completed by March 31, 1999 (unless due to
a delay or default on the part of Parent);
(iii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of Parent and if Parent
shall have used reasonable efforts to prevent the entry of such order;
(iv) if the Board of Directors of the Company shall have resolved to
accept a Superior Proposal or shall have recommended to the
stockholders of the Company that they tender their shares in a tender
or an exchange offer commenced by a third party (excluding any
affiliate of Parent or any group of which any affiliate of Parent is a
member);
(v) if the Company (A) fails to perform in any material respect any
of its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after written notice of
such default specifying such default in reasonable detail is given to
the Company by Parent; or
(vi) if the stockholders of the Company fail to approve the Merger at
a duly held meeting of stockholders called for such purpose or any
adjournment or postponement thereof.
(c) As used in this Section 9.1, (i) "affiliate" has the meaning assigned
to it in Section 7.4 and (ii) "group" has the meaning set forth in Section
13(d) of the Exchange Act and the rules and regulations thereunder.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of
Section 9.1, this Agreement shall forthwith become void and there shall be no
liability or further obligation on the part of the Company, Parent, Subsidiary
or their respective officers or directors (except in this Section 9.2, the
second sentence of Section 7.1(a), Section 7.1(b), Section 7.6 and Section
10.4 shall survive the termination). Nothing in this Section 9.2 shall relieve
any party from liability for any willful and intentional breach of any
covenant or agreement of such party contained in this Agreement.
Section 9.3 Amendment. This Agreement may not be amended except by action
taken by the parties' respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in writing signed on behalf
of each of the parties hereto and in compliance with applicable law. Such
amendment may take place at any time prior to the Closing Date, and, subject
to applicable law, whether before or after approval by the stockholders of the
Company, Parent or Subsidiary.
Section 9.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE X
General Provisions
Section 10.1 Non-Survival of Representations and Warranties. No
representations, warranties or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, and
after effectiveness of the Merger neither the Company, Parent, Subsidiary or
their respective officers or directors shall have any further obligation with
respect thereto except for the representations, warranties and agreements
contained in Articles II, III and X, Section 7.9, Section 7.11, and Section
7.13.
Section 10.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via
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facsimile to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a)If to Parent or Subsidiary to:
Waste Management, Inc.
1001 Fannin, Suite 4000
Houston, TX 77002
Attn: Gregory T. Sangalis
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attn: John A. Marzulli, Jr.
(b)If to the Company, to:
Eastern Environmental Services, Inc.
1000 Crawford Place
Mt. Laurel, NJ 08054
Attn: Robert M. Kramer
with a copy to:
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 110
Philadelphia, PA 19107-3496
Attn: H. John Michel, Jr.
Section 10.3 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary
intention appears, (i) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof, (b) shall not be assigned by operation of law or otherwise, except
that Subsidiary may assign this Agreement to any other wholly-owned subsidiary
of Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING
VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
THE EXCLUSIVE VENUE FOR THE ADJUDICATION OF ANY DISPUTE OR PROCEEDING ARISING
OUT OF THIS AGREEMENT OR THE PERFORMANCE THEREOF SHALL BE THE COURTS LOCATED
IN THE STATE OF DELAWARE AND THE PARTIES HERETO AND THEIR AFFILIATES EACH
CONSENT TO AND HEREBY SUBMIT TO THE JURISDICTION OF ANY COURT LOCATED IN THE
STATE OF DELAWARE.
Section 10.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 10.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except as set forth in
Sections 2.1, 2.2, 3.3, 7.9, 7.11 and 7.13 (which are intended to and
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shall create third party beneficiary rights if the Merger is consummated),
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement. The rights of any third party beneficiary hereunder
are not subject to any defense, offset or counterclaim.
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers and attested to as of the
date first written above.
WASTE MANAGEMENT, INC.
Attest:
/s/ Gregory T. Sangalis By: /s/ John E. Drury
- ------------------------------------- ----------------------------------
Secretary Name:John E. Drury
Title:Chairman and Chief
Executive Officer
OCHO ACQUISITION CORPORATION
Attest:
/s/ Earl E. DeFrates By: /s/ Gregory T. Sangalis
- ------------------------------------- ----------------------------------
Secretary Name:Gregory T. Sangalis
Title:
EASTERN ENVIRONMENTAL SERVICES, INC.
Attest:
/s/ Robert Kramer By: /s/ Louis D. Paolino, Jr.
- ------------------------------------- ----------------------------------
Secretary Name:Louis D. Paolino, Jr.
Title: Chairman, President and
Chief Executive Officer
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ANNEX B
[LETTERHEAD OF SALOMON SMITH BARNEY]
August 16, 1998
Board of Directors
Eastern Environmental Services, Inc.
1000 Crawford Place, Suite 400
Mt. Laurel, NJ 08054
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $.01 per share ("Company
Common Stock"), of Eastern Environmental Services, Inc. (the "Company"), of
the consideration to be received by such holders in connection with the
proposed merger (the "Merger") of the Company with Ocho Acquisition
Corporation ("Sub"), a wholly owned subsidiary of Waste Management, Inc.
("Parent"), pursuant to an Agreement and Plan of Merger, dated as of August
16, 1998 (the "Merger Agreement"), among the Parent, Sub and Company. Upon the
effectiveness of the Merger, each issued and outstanding share of Company
Common Stock (other than shares owned by Parent, any subsidiary of Parent, the
Company or any subsidiary of the Company) will be converted into and represent
the right to receive 0.6406 (the "Exchange Ratio") shares of the common stock,
par value $.01 per share ("Parent Common Stock"), of Parent.
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning the Company and Parent and certain other
financial information concerning the Company and Parent, including financial
forecasts, that were provided to us by the Company and Parent, respectively.
We have discussed the past and current business operations, financial
condition and prospects of the Company and Parent with certain officers and
employees of the Company and Parent, respectively. We have also considered
such other information, financial studies, analyses, investigations and
financial, economic and market criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by
us for the purpose of this opinion and we have not assumed any responsibility
for independent verification of such information. With respect to the
financial forecasts of the Company and Parent, we have been advised by the
respective management of the Company and Parent that such forecasts have been
reasonably prepared on bases reflecting their best currently available
estimates and judgments, and we express no opinion with respect to such
forecasts or the assumptions on which they are based. We have not assumed any
responsibility for any independent evaluation or appraisal of any of the
assets (including properties and facilities) or liabilities of the Company or
Parent. We were not asked to, and did not, solicit other proposals to acquire
the Company. We have assumed that the Merger will be accounted for as a
pooling-of-interests in accordance with generally accepted accounting
principles as described in Accounting Principles Board Opinion Number 16.
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply
any conclusion as to the likely trading range for Parent Common Stock
following the consummation of the Merger, which may vary depending upon, among
other factors, changes in interest rates, dividend rates, market conditions,
general economic conditions and other factors that generally influence the
price of securities. Our opinion does not address the Company's underlying
business decision to effect the Merger, and we express no view on the effect
on the Company of the Merger and related
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transactions. Our opinion is directed only to the fairness, from a financial
point of view, of the Exchange Ratio to holders of Company Common Stock and
does not constitute a recommendation concerning how holders of Company Common
Stock should vote with respect to the Merger Agreement or the Merger.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a portion of which is payable
upon initial delivery of this fairness opinion and the remainder of which is
contingent upon consummation of the Merger. In the ordinary course of
business, we and our affiliates may actively trade the securities of the
Company and Parent for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, we and our affiliates have previously rendered certain investment
banking and financial advisory services to the Company and Parent for which we
have received customary compensation. We and our affiliates (including
Travelers Group Inc.) may have other business relationships with the Company
or Parent in the ordinary course of their businesses.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of Company Common Stock
(other than Parent) from a financial point of view.
Very truly yours,
/s/ SALOMON SMITH BARNEY
SALOMON SMITH BARNEY
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ANNEX C
STOCKHOLDERS SUPPORT AGREEMENT
STOCKHOLDERS SUPPORT AGREEMENT, dated as of August 16, 1998 (this
"Agreement"), among WASTE MANAGEMENT, INC., a Delaware corporation ("Parent"),
OCHO ACQUISITION CORPORATION, a Delaware corporation and a wholly owned
subsidiary of Parent ("Subsidiary"), and the stockholders whose names appear
on the signature pages of this Agreement (each a "Stockholder" and
collectively the "Stockholders").
WHEREAS, as of the date hereof, the Stockholders own of record or has the
power to vote the number of shares of Common Stock, par value $.01 per share
("Company Common Stock"), of Services Inc., a Delaware corporation (the
"Company") as set forth opposite such Stockholder's name on Exhibit A hereto
(all such Company Common Stock and any shares of Company Common Stock of which
ownership of record or the power to vote is hereafter acquired by the
Stockholders prior to the termination of this Agreement being referred to
herein as the "Shares");
WHEREAS, Parent, Subsidiary and the Company propose to enter into (i) an
Agreement and Plan of Merger, dated as of even date herewith (as the same may
be amended from time to time, the "Merger Agreement"), which provides, upon
the terms and subject to the conditions thereof, for the merger of Subsidiary
with and into the Company (the "Merger") and (ii) an agreement granting Parent
an option on certain shares of Company Common Stock (the "Stock Option
Agreement"); and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has requested that the Stockholders agree, and, in
order to induce Parent to enter into the Merger Agreement, the Stockholders
have agreed, jointly and severally, to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
Transfer and Voting of Shares
SECTION 1.01. Transfer of Shares. No Stockholder shall, directly or
indirectly, (a) sell (other than pursuant to any brokers' transaction executed
upon the Stockholder's orders on any exchange or in the over the counter
market), pledge (other than in connection with margin accounts maintained by
such Stockholder) or otherwise dispose of any or all of such Stockholder's
Shares, (b) deposit any Shares into a voting trust or enter into a voting
agreement or arrangement with respect to any Shares or grant any proxy with
respect thereto or (c) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale (other
than pursuant to any brokers' transaction executed upon the Stockholder's
orders on any exchange or in the over the counter market), assignment,
transfer or other disposition of any Shares.
SECTION 1.02. Voting of Shares; Further Assurances. (a) Each Stockholder, by
this Agreement, with respect to the Shares set out in Exhibit A hereto and any
Shares hereinafter acquired by such Stockholder, does hereby constitute and
appoint Subsidiary, or any nominee of Subsidiary, with full power of
substitution, as his, her or its true and lawful attorney and proxy, for and
in his, her or its name, place and stead, to vote each of such Shares as his,
her or its proxy, at every annual, special or adjourned meeting of the
stockholders of the Company (including the right to sign his, her or its name
(as stockholder) to any consent, certificate or other document relating to the
Company that may be permitted or required by applicable law) (i) in favor of
the adoption of the Merger Agreement and approval of the Merger and the other
transactions contemplated by the Merger Agreement, (ii) against any
transaction pursuant to an Acquisition Proposal (as defined below) or any
other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which could result in any of the conditions to
the Company's obligations under the Merger Agreement not being fulfilled, and
(iii) in favor of any other matter relating to consummation of the
transactions contemplated by the Merger Agreement. Each
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Stockholder further agrees to cause the number of Shares as set forth opposite
such Stockholder's name in Exhibit A hereto and all Shares over which he has
voting power to be voted in accordance with the foregoing. Each Stockholder
acknowledges receipt and review of a copy of the Merger Agreement.
(b) Each Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
Subsidiary the power to carry out the provisions of this Agreement.
(c) The obligations of the Stockholders pursuant to this Article I shall
terminate upon the earlier of (i) the Effective Time (as defined in the Merger
Agreement) (ii) (x) 180 days after the termination of the Merger Agreement in
case of termination that entitles Parent to a fee under Section 7.6 of the
Merger Agreement, or (y) on the date of termination in the case of termination
for any other reason.
ARTICLE II
Representations and Warranties; Covenants of the Stockholder
The Stockholders hereby severally represent and warrant and covenant to
Subsidiary as follows:
SECTION 2.01. Organization; Authorization. (a) Such Stockholder, if it is a
corporation, is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals
would not prevent or delay the performance in any material respect by such
Stockholder of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of each Stockholder.
(b) Such Stockholder, if it is a limited partnership, (i) is a limited
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) has all requisite
partnership power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and (iii) the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Stockholder, except, with respect to clauses (i) and (ii) above,
where the failure to be so organized, existing or in good standing or to have
such power and authority would not prevent or delay in any material respect
performance by such Stockholder of its obligations under this Agreement.
(c) Such Stockholder, if it is a trust, (i) is duly formed as a trust under
the laws of the jurisdiction of its formation and its trust agreement is valid
and in full force and effect, (ii) has all requisite power and authority under
its trust instruments to execute and deliver this Agreement and to consummate
the transactions contemplated hereby and (iii) the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of such
Stockholder, except, with respect to clauses (i) and (ii) above, where the
failure to be so formed or to have such power and authority would not prevent
or delay in any material respect performance by such Stockholder of its
obligations under this Agreement.
(d) Such Stockholder, if it is an individual, has all legal capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(e) This Agreement has been duly executed and delivered by or on behalf of
each Stockholder and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of each
Stockholder, enforceable against each Stockholder in accordance with its
terms.
SECTION 2.02. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by such Stockholder do not, and the performance
of this Agreement by such Stockholder will not, (i)
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conflict with or violate the Certificate of Incorporation or By-laws or
equivalent organizational documents of such Stockholder (if any), (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to such Stockholder or by which it or any of its, his or her
properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to another party any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of such
Stockholder, including, without limitation, the Shares, pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such Stockholder is a
party or by which such Stockholder or any of its, his or her properties is
bound or affected, except for any such breaches, defaults or other occurrences
that would not prevent or delay the performance by such Stockholder of its
obligations under this Agreement. There is no beneficiary or holder of a
voting trust certificate or other interest of any trust of which the
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by the Stockholder of the
transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by such Stockholder do not,
and the performance of this Agreement by such Stockholder will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Hart-Scott-
Rodino Antitrust Improvement Act of 1976 and the rules and regulations
promulgated thereunder (the "HSR Act") and (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings
or notifications, would not prevent or materially delay the performance by
such Stockholder of his or its obligations under this Agreement.
SECTION 2.03. Title to Shares. Such Stockholder is the record or beneficial
owner of its Shares free and clear of any proxy or voting restriction other
than pursuant to this Agreement. Such Shares are all the securities of the
Company owned of record or beneficially by such Stockholder on the date of
this Agreement.
SECTION 2.04. Acquisition Proposals. Until the termination of the Merger
Agreement the Stockholder shall not, initiate, solicit, negotiate, encourage
or provide nonpublic or confidential information to facilitate, any proposal
or offer to acquire all or any substantial part of the business or properties
of the Company or any capital stock of the Company, whether by merger,
purchase of assets, tender offer or otherwise, whether for cash, securities or
any other consideration or combination thereof (any such transactions being
referred to herein as an "Acquisition Transaction") or participate in any
negotiations regarding, or furnish to any other person or entity any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that nothing in
this Section 2.04 shall prevent the Stockholder, in his capacity as a director
or executive officer of the Company from engaging in any activity permitted
pursuant to Section 6.5 of the Merger Agreement. From and after the execution
of this Agreement, the Stockholder shall promptly (but in any event within 48
hours) notify Parent after receipt of any unsolicited written offer or
proposal with respect to a potential or proposed Acquisition Transaction
("Acquisition Proposal"), indication of interest or request for nonpublic
information relating to the Company or its subsidiaries in connection with an
Acquisition Proposal that the Stockholder receives in his capacity as a
Stockholder of the Company. Such notice to Subsidiary shall be made orally and
in writing and shall indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or contact.
C-3
<PAGE>
ARTICLE III
Representations and Warranties of Parent
Parent hereby represents and warrants to the Stockholders as follows:
SECTION 3.01. Due Organization; Binding Agreement. Each of Parent and
Subsidiary is duly organized and validly existing under the laws of the State
of Delaware. Each of Parent and Subsidiary has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Parent and
Subsidiary have been duly authorized by all necessary corporate action on the
part of each of Parent and Subsidiary. This Agreement has been duly executed
and delivered by each of Parent and Subsidiary and, assuming its due
authorization, execution and delivery by the Stockholders, constitutes a
legal, valid and binding obligation of each of Parent and Subsidiary,
enforceable against each of Parent and Subsidiary in accordance with its
terms.
SECTION 3.02. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Subsidiary does not, and the
performance of this Agreement by Parent and Subsidiary will not, (i) conflict
with or violate the organizational documents of either Parent or Subsidiary,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or Subsidiary or by which Parent or Subsidiary or
any property of Parent or Subsidiary is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent
or Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Subsidiary is a party or by which it or any property of
Parent or Subsidiary is bound or affected, except for any such breaches,
defaults or other occurrences that would not prevent or materially delay the
performance by Parent or Subsidiary of their obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and Subsidiary do
not, and the performance of this Agreement by Parent and Subsidiary will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Exchange Act
and the HSR Act and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Parent or Subsidiary of their obligations
under this Agreement.
ARTICLE IV
General Provisions
SECTION 4.01. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by cable, telecopy,
telegram or telex or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address as shall be specified by notice given in accordance with
this Section 4.01):
(a)if to Parent or Subsidiary:
Waste Management, Inc.
1001 Fannin Street, Suite 4000
Houston, Texas 77002
Attention:
C-4
<PAGE>
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No: (212) 848-7179
Attention: John A. Marzulli, Jr., Esq.
(b)If to Stockholders to:
Eastern Environmental Services, Inc.
1000 Crawford Place
Mt. Laurel, New Jersey 08054
Attention: Robert Kramer
with a copy to:
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 110
Philadelphia, PA 1910-3496
Attention: H. John Michel, Jr.
SECTION 4.02. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 4.03. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 4.04. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to
the subject matter hereof.
SECTION 4.05. Assignment. This Agreement shall not be assigned by operation-
of law or otherwise.
SECTION 4.06. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
any right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
SECTION 4.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or in equity.
SECTION 4.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceeding arising out of or relating to this Agreement shall be heard and
determined in any Delaware state or federal court. THE STOCKHOLDERS AND
SUBSIDIARY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENT (VERBAL OR WRITTEN) OR ACTION OF THE STOCKHOLDERS OR
SUBSIDIARY.
C-5
<PAGE>
SECTION 4.09. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WASTE MANAGEMENT, INC.
By: /s/ John E. Drury
----------------------------------
Name:John E. Drury
Title:Chairman and Chief
Executive Officer
OCHO ACQUISITION CORPORATION
By: /s/ Gregory T. Sangalis
----------------------------------
Name:Gregory T. Sangalis
Title:
STOCKHOLDERS
/s/ Willard Miller
-------------------------------------
Willard Miller
/s/ Louis D. Paolino, Jr.
-------------------------------------
Louis D. Paolino, Jr.
/s/ Glen Miller
-------------------------------------
Glen Miller
/s/ George O. Moorehead
-------------------------------------
George O. Moorehead
/s/ Robert M. Kramer
-------------------------------------
Robert M. Kramer
/s/ Gregory M. Krzemien
-------------------------------------
Gregory M. Krzemien
C-6
<PAGE>
EXHIBIT A
LIST OF STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMPANY COMMON STOCK
OWNED BENEFICIALLY
NAME OF STOCKHOLDER AND OF RECORD
------------------- --------------------
<C> <S> <C>
1. Willard Miller....................................... 1,298,781
2. Louis D. Paolino, Jr. ............................... 940,074
3. Glen Miller.......................................... 1,037,895
4. George O. Moorehead.................................. 357,297
5. Robert M. Kramer..................................... 10,000
6. Gregory M. Krzemien.................................. 101,885
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except in cases where the director breached his or her
duty of loyalty to the corporation or its stockholders, failed to act in good
faith, engaged in intentional misconduct or a knowing violation of the law,
willfully or negligently authorized the unlawful payment of a dividend or
approved an unlawful stock redemption or repurchase or obtained an improper
personal benefit. The Registrant's Restated Certificate of Incorporation (the
"Waste Management Charter") contains a provision which eliminates directors'
personal liability as set forth above.
The Waste Management Charter and the Bylaws of Waste Management provide in
effect that the Registrant shall indemnify its directors and officers, and may
indemnify its employees and agents, to the extent permitted by the DGCL.
Section 145 of the DGCL provides that a Delaware corporation has the power to
indemnify its directors, officers, employees and agents in certain
circumstances.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director, officer, employee or agent, or former director,
officer, employee or agent who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding provided that such
director, officer, employee or agent acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that such director, officer, employee or agent had no reasonable cause to
believe that his or her conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any director, officer, employee or agent, or former director,
officer, employee or agent, who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in any of the capacities set forth above, against
expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such action or suit provided that
such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation, except that
no indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery shall determine that,
despite the adjudication of liability, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that, to the extent that a director
or officer of a corporation has been successful in the defense of any action,
suit or proceeding referred to in subsections (a) and (b) of Section 145 of
the DGCL or in the defense of any claim, issue or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith; that
indemnification provided by Section 145 of the DGCL shall not be deemed
exclusive of any other rights to which the party seeking indemnification may
be entitled; and the corporation is empowered to purchase and maintain
insurance on behalf of a director, officer, employee or agent of the
corporation against any liability asserted against him or her or incurred by
him or her in any such capacity or arising out of his or her status as such
whether or not the corporation would have the power to indemnify him or her
against such liabilities under Section 145 of the DGCL; and that, unless
indemnification is ordered by a court, the determination that indemnification
under subsections (a) and (b) of Section 145 of the DGCL is proper because the
director, officer, employee or agent has met the applicable standard of
conduct under such subsections shall be made with respect
II-1
<PAGE>
to a person who is a director or officer at the time of such determination (1)
by a majority vote of the directors who are not parties to such action, suit
or proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than
a quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
The Registrant has purchased certain liability insurance for its officers
and directors as permitted by Section 145(g) of the DGCL.
The Registrant has entered into Indemnification Agreements with certain of
its directors and executive officers. Such Indemnification Agreements provide
that such persons (the "Indemnitees") will be indemnified and held harmless
from all expenses, including (without limitation) reasonable fees and expenses
of counsel, and all liabilities, including (without limitation) the amount of
any judgments, fines, penalties, excise taxes and amounts paid in settlement,
actually incurred by an Indemnitee with respect to any threatened, pending or
completed claim, action (including any action by or in the right of the
Registrant), suit or proceeding (whether formal or informal, or civil,
criminal, administrative, legislative, arbitrative or investigative) in
respect of which such Indemnitee is, was or at any time becomes, or is
threatened to be made, a party, witness, subject or target, by reason of the
fact that such Indemnitee is or was a director, officer, agent or fiduciary of
the Registrant or serving at the request of the Registrant as a director,
officer, employee, fiduciary or representative of another enterprise. Such
Indemnification Agreements also provide that the Registrant, if requested to
do so by an Indemnitee, will advance to such Indemnitee, prior to final
disposition of any proceeding, the expenses actually incurred by the
Indemnitee subject to the obligation of the Indemnitee to refund if it is
ultimately determined that such Indemnitee was not entitled to
Indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are exhibits to the Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of August 16, 1998, among Waste
Management, Ocho Acquisition and Eastern (included as Annex A to
the Proxy Statement/Prospectus which is part of this Registration
Statement*).
4.1 Form of Stock Certificate of Waste Management Common Stock.
5.1 Opinion of Shearman & Sterling as to the legality of the securities
being registered.
8.1 Opinion of Shearman & Sterling as to the material United States
federal income tax consequences of the Merger.
8.2 Opinion of Drinker Biddle & Reath LLP as to the material United States
federal income tax consequences of the Merger.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of B.J. Klinger & Co.
23.5 Consent of BDO Seidman, LLP.
23.6 Consent of Bardall, Weintraub P.C.
23.7 Consent of Boyer & Ritter.
23.8 Consent of Paternostro, Callahan & DeFreitas, LLP.
23.9 Consent of David P. Irwin & Associates P.C.
23.10 Consent of Deloitte & Touche, LLP.
23.11 Consent of Strothman & Company PSC.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
23.12 Consent of Mills and DeFilippis LLP.
23.13 Consent of Christopher Rayner & Associates
23.14 Consent of Shearman & Sterling (included in Exhibit 5.1 and Exhibit
8.1 to this Registration Statement).
23.15 Consent of Drinker Biddle & Reath LLP (included in Exhibit 8.2 to this
Registration Statement).
23.16 Consent of Salomon Smith Barney.
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
99.1 Stockholders Support Agreement, dated as of August 16, 1998, among
Waste Management, Ocho Acquisition and certain stockholders of
Eastern (included as Annex C to the Proxy Statement/Prospectus
which is part of this Registration Statement).
99.2 Form of Eastern's proxy card for the Special Meeting of Stockholders.
99.3 Form of Eastern's Chairman and Chief Executive Officer's Letter.
99.4 Form of Eastern's Notice of Special Meeting of Stockholders.
99.5 Opinion of Salomon Smith Barney (included as Annex B to the Proxy
Statement/Prospectus which is part of this Registration Statement).
</TABLE>
- --------
* Schedules referred to in the Agreement and Plan of Merger are omitted from
this filing. The Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request, in accordance with Item
601(b)(2) of Regulation S-K.
(b) Not applicable.
(c) The opinion of Salomon Smith Barney is included as Annex B to the Proxy
Statement/Prospectus which is part of this Registration Statement.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar amount of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration Statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
II-4
<PAGE>
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form S-4,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Waste
Management, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-4, and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on
September 24, 1998.
Waste Management, Inc.
/s/ John E. Drury
By: _________________________________
JOHN E. DRURY
CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John E. Drury, Earl E. DeFrates and Gregory T.
Sangalis, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (including his capacity as a
director and/or officer of Waste Management, Inc.) to sign any or all
amendments (including pre-effective and post-effective amendments) to this
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Robert S. Miller Chairman of the
- ------------------------------------- Board
ROBERT S. MILLER
/s/ John E. Drury Chief Executive
- ------------------------------------- Officer and
JOHN E. DRURY Director (Principal
Executive Officer)
/s/ Rodney R. Proto President, Chief September 24,
- ------------------------------------- Operating Officer 1998
RODNEY R. PROTO and Director
/s/ Earl E. DeFrates Executive Vice
- ------------------------------------- President and Chief
EARL E. DEFRATES Financial Officer
(Principal
Financial Officer)
/s/ Bruce E. Snyder Vice President and
- ------------------------------------- Chief Accounting
BRUCE E. SNYDER Officer (Principal
Accounting Officer)
II-6
<PAGE>
SIGNATURES TITLE DATE
---------- ----- ----
/s/ H. Jesse Arnelle Director
- -------------------------------------
H. JESSE ARNELLE
/s/ Pastora San Juan Cafferty Director
- -------------------------------------
PASTORA SAN JUAN CAFFERTY
/s/ Ralph F. Cox Director
- -------------------------------------
RALPH F. COX
/s/ Richard J. Heckmann Director
- -------------------------------------
RICHARD J. HECKMANN
/s/ Roderick M. Hills Director
- -------------------------------------
RODERICK M. HILLS
/s/ Richard D. Kinder Director September 24, 1998
- -------------------------------------
RICHARD D. KINDER
/s/ Paul M. Montrone Director
- -------------------------------------
PAUL M. MONTRONE
/s/ John C. Pope Director
- -------------------------------------
JOHN C. POPE
/s/ Steven G. Rothmeier Director
- -------------------------------------
STEVEN G. ROTHMEIER
/s/ Ralph V. Whitworth Director
- -------------------------------------
RALPH V. WHITWORTH
/s/ Jerome B. York Director
- -------------------------------------
JEROME B. YORK
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of August 16, 1998, among Waste
Management, Ocho Acquisition and Eastern (included as Annex A to
the Proxy Statement/Prospectus which is part of this Registration
Statement*).
4.1 Form of Stock Certificate of Waste Management Common Stock.
5.1 Opinion of Shearman & Sterling as to the legality of the securities
being registered.
8.1 Opinion of Shearman & Sterling as to the material United States
federal income tax consequences of the Merger.
8.2 Opinion of Drinker Biddle & Reath LLP as to the material United States
federal income tax consequences of the Merger.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of B.J. Klinger & Co.
23.5 Consent of BDO Seidman, LLP.
23.6 Consent of Bardall, Weintraub P.C.
23.7 Consent of Boyer & Ritter.
23.8 Consent of Paternostro, Callahan & DeFreitas, LLP.
23.9 Consent of David P. Irwin & Associates P.C.
23.10 Consent of Deloitte & Touche, LLP.
23.11 Consent of Strothman & Company PSC.
23.12 Consent of Mills and DeFilippis LLP.
23.13 Consent of Christopher Rayner & Associates
23.14 Consent of Shearman & Sterling (included in Exhibit 5.1 and Exhibit
8.1 to this Registration Statement).
23.15 Consent of Drinker Biddle & Reath LLP (included in Exhibit 8.2 to this
Registration Statement).
23.16 Consent of Salomon Smith Barney.
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
99.1 Stockholders Support Agreement, dated as of August 16, 1998, among
Waste Management, Ocho Acquisition and certain stockholders of
Eastern (included as Annex C to the Proxy Statement/Prospectus
which is part of this Registration Statement).
99.2 Form of Eastern's proxy card for the Special Meeting of Stockholders.
99.3 Form of Eastern's Chairman and Chief Executive Officer's Letter.
99.4 Form of Eastern's Notice of Special Meeting of Stockholders.
99.5 Opinion of Salomon Smith Barney (included as Annex B to the Proxy
Statement/Prospectus which is part of this Registration Statement).
</TABLE>
- --------
* Schedules referred to in the Agreement and Plan of Merger are omitted from
this filing. The Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request, in accordance with Item
601(b)(2) of Regulation S-K.
<PAGE>
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS COMMON STOCK
OF THE STATE OF DELAWARE PAR VALUE $0.01 PER SHARE
THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 94106L 10 9
CHICAGO, IL OR NEW YORK, NY SEE REVERSE FOR CERTAIN DEFINITIONS
[WASTE MANAGEMENT LOGO W/GLOBE]
WASTE MANAGEMENT,INC.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
CERTIFICATE OF STOCK
Waste Management, Inc. ("Corporation") transferable on the books of the
Corporation, in person or by duly authorized attorney, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be subject to all of the provisions of the
Certificate of Incorporation of the Corporation and of the amendments thereto,
to all of which the holder, by acceptance hereof, assents. This Certificate is
not valid unless countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ John E. Drury COUNTERSIGNED AND REGISTERED
CHIEF EXECUTIVE OFFICER HARRIS TRUST AND SAVINGS BANK
TRANSFER AGENT
AND REGISTRAR
/S/ GREGORY T. SANGALIS BY
SECRETARY /S/ STEVE ROTHBLOOM
AUTHORIZED SIGNATURE
[WASTE MANAGEMENT (WM) LOGO]
NUMBER
WM
American Bank Note Company
SHARES
[Waste Management SEAL]
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF SHEARMAN & STERLING]
September 24, 1998
Waste Management Services, Inc.
1001 Fannin Street
Suite 4000
Houston, Texas 77002
Ladies and Gentlemen:
We have acted as special counsel to Waste Management, Inc., a Delaware
corporation ("Waste Management"), in connection with the Registration Statement
on Form S-4 (the "Registration Statement") being filed by Waste Management on
the date hereof with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, with respect to 25,155,000 shares of common stock,
par value $.01 per share, of Waste Management (the "Common Stock"). The Common
Stock is being registered in connection with the merger (the "Merger") of Ocho
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Waste Management ("Ocho Acquisition"), with and into Eastern Environmental
Services, Inc., a Delaware corporation ("Eastern"), pursuant to the Agreement
and Plan of Merger, dated as of August 16, 1998, among Waste Management, Ocho
Acquisition and Eastern (the "Agreement"). The Common Stock is described in the
Proxy Statement/Prospectus (the "Prospectus") included in the Registration
Statement, to which this opinion is an exhibit.
In that connection, we have reviewed the Registration Statement and
originals, or copies certified or otherwise identified to our satisfaction, of
such other documents, corporate records, certificates and other instruments as
we have deemed necessary or appropriate for purposes of this opinion. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents, certificates and instruments submitted to us as originals and
the conformity with the originals of all documents submitted to us as copies.
<PAGE>
Waste Management, Inc. 2 September 24, 1998
Based upon the foregoing, we are of the opinion that the shares of
Common Stock to which the Registration Statement relates have been duly
authorized and, when issued in connection with the Merger as contemplated by the
Agreement, will be validly issued, fully paid and non-assessable.
Our opinions expressed above are limited to the General Corporation
Law of the State of Delaware and we do not express any opinion herein concerning
any other law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "LEGAL
MATTERS" contained in the Prospectus.
Very truly yours,
/s/ Shearman & Sterling
JAM/MR/HPZ
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF SHEARMAN & STERLING]
September 25, 1998
Waste Management, Inc.
1001 Fannin, Suite 4000
Houston, TX 77002
Merger of Ocho Acquisition Corporation
with and into
Eastern Environmental Services, Inc.
--------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Waste Management, Inc., a Delaware
corporation (the "Parent") in connection with (i) the proposed merger (the
"Merger") of Ocho Acquisition Corporation, a Delaware corporation (the "Sub")
which is a wholly-owned, directly held subsidiary of Parent with and into
Eastern Environmental Services, Inc., a Delaware corporation (the "Company") and
(ii) the Registration Statement on Form S-4 of Parent (the "Registration
Statement") relating to the Merger. The Merger will be effected pursuant to an
Agreement and Plan of Merger, dated as of August 16, 1998 (the "Merger
Agreement"), among the Parent, the Sub and the Company. Unless otherwise
defined, capitalized terms used herein have the meaning assigned to them in the
Merger Agreement.
In delivering our opinion, we have reviewed the Merger Agreement and the
documents attached as Exhibits thereto and have assumed that the representations
and warranties therein are true and correct and that the parties have complied
with and, if applicable, will comply with the covenants contained therein. We
have reviewed the Proxy Statement/Prospectus of Parent (which forms a part of
the Registration Statement) and the Proxy Statement/Prospectus of the Company
and have assumed that the factual statements therein are and will remain true,
correct and complete. Any variation or difference in the facts from those set
forth either herein or in the Registration Statement or Proxy Statement/
<PAGE>
Waste Management, Inc.
September 25, 1998
Prospectus of the Company may affect the conclusions stated herein. In
addition, we have assumed that representations will be made by the Parent and
the Company in letters to us substantially in the forms attached hereto and have
assumed that such representations will be true and accurate as of the Effective
Time.
Based upon the foregoing, in reliance thereon and subject thereto, and
based upon the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Regulations promulgated thereunder, judicial decisions, revenue rulings
and revenue procedures of the Internal Revenue Service, and other
administrative pronouncements, all as in effect on the date hereof, and assuming
that the Merger and related transactions will take place in accordance with the
terms of the Merger Agreement, it is our opinion that:
1. The Merger will be treated for United States federal income tax
purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code; and
2. Each of the Parent, the Sub and the Company will be a party to
the reorganization within the meaning of Section 368(b).
It is also our opinion that each of the discussions in the
Registration Statement under the captions "SUMMARY -- The Merger -- Certain
Federal Income Tax Consequences" and "THE MERGER -- Certain Federal Income Tax
Consequences," insofar as each relates to matters of United States federal
income tax law, is a fair and accurate summary of such matters. We express no
opinion (i) as to whether such descriptions address all of the United States
federal income tax consequences of the Merger that may be applicable to the
Company, the Parent or any particular Company stockholder or (ii) as to the
United States federal, state, local, foreign or other tax consequences, other
than as set forth in the Registration Statement under the captions "SUMMARY --
The Merger -- Certain Federal Income Tax Consequences" and "THE MERGER --Certain
Federal Income Tax Consequences." There can be no assurance that contrary
positions may not be asserted by the Internal Revenue Service.
No opinion is expressed as to any matter not specifically addressed
above, including the accuracy of the representations or reasonableness of the
assumptions relied upon by us in rendering the opinion set forth above. The
opinion is furnished to you solely for your exclusive use, and it may not be
distributed, published, or relied upon by any other person without our prior
written consent. Our opinion is based on current United States federal
income tax law and administrative practice, and we do not undertake to advise
you as to any future changes in United states federal income tax law or
administrative practice that may affect our opinion unless we are specifically
retained to do so.
<PAGE>
Waste Management, Inc. September 25, 1998
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to Shearman & Sterling under the
captions "THE MERGER--Certain Federal Income Tax Consequences" and "LEGAL
MATTERS" in the Registration Statement.
Very truly yours,
/s/ Shearman & Sterling
SHEARMAN & STERLING
MKW/AFS/jm
<PAGE>
EASTERN ENVIRONMENTAL REPRESENTATION LETTER
____________, 1998
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-4676
Ladies and Gentlemen:
On behalf of Eastern Environmental Services, Inc., a Delaware
corporation (the "Company"), the undersigned, in connection with the opinion to
be delivered by you pursuant to section 8.3(b) of the Agreement and Plan of
Merger (the "Agreement"; terms used but not defined herein have the meanings
ascribed to them in the Agreement) dated as of August 16, 1998 among Ocho
Acquisition Corporation ("Sub"), a Delaware corporation and a direct wholly-
owned subsidiary of Waste Management, Inc., a Delaware corporation ("Parent"),
hereby certifies that, to the extent the facts relate to the Company (other than
representation number 7) to his knowledge and after due diligence, and to the
extent otherwise without knowledge to the contrary, and with respect to
representation number 7, to the extent without knowledge to the contrary,
1. The fair market value of the Parent Common Stock and other
consideration received by each shareholder of the Company will be approximately
equal to the fair market value of the Company Common Stock exchanged in the
Merger.
2. At least 50 percent of the value of the shareholders' proprietary
interests in the Company will be preserved as a proprietary interest in Parent
received in exchange for Company Common Stock. For purposes of this
representation, proprietary interests will not be preserved to the extent that,
in connection with the Merger: (i) an extraordinary distribution is made with
respect to the stock of the Company; (ii) a redemption or acquisition of stock
of the Company is made by the Company or a person related to the Company; (iii)
Parent or a person related to Parent acquires stock of the Company for
consideration other than Parent stock; or (iv) Parent redeems its stock issued
in the Merger. Any reference to Parent or the Company includes a reference to
any successor or predecessor of such corporation, except that the Company is not
treated as a predecessor of Parent. A corporation will be treated as related to
another corporation if they are both members of the same affiliated group within
the meaning of Section 1504 of the Code (without regard to the exceptions in
Section 1504(b)) or they are related as described in Section 304(a)(2) of the
Code (disregarding Treas. Reg. (S)1.1502-80(b)), in either case whether such
relationship exists immediately before or immediately after the acquisition.
Each partner of a partnership will be treated as owning or acquiring any stock
owned or acquired, as the case may be, by the partnership (and as having paid
any consideration paid by the partnership to acquire such stock) in accordance
with that partner's interest in the partnership. As used in this representation
letter, the term "partnership" shall have the same meaning given to it in
Section 7701(a)(2) of the Code.
<PAGE>
2
3. Following the Merger, the Company will hold at least 90 percent
of the fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair market
value of Sub's net assets and at least 70 percent of the fair market value of
the Sub's gross assets held immediately prior to the Merger. For purposes of
this representation, amounts paid by the Company or Sub to dissenters, amounts
paid by the Company or Sub to shareholders who receive cash or other property,
amounts used by the Company or Sub to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by the
Company will be included as assets of the Company or Sub, respectively,
immediately prior to the Merger.
4. The Company has no present plan or intention to issue additional
shares of its stock that, assuming the Merger is consummated, would result in
Parent losing control of the Company within the meaning of section 368(c) of the
Internal Revenue Code. For this purpose, the term "control" means the ownership
of stock possessing at least 80 percent of the total combined voting power of
all classes of stock entitled to vote and at least 80 percent of the total
number of shares of all other classes of stock of the corporation.
5. Each of the Parent, Sub, the Company and the shareholders of the
Company will pay their respective expenses, if any, incurred in connection with
the Merger.
6. There is no intercorporate indebtedness existing between Parent
and the Company, or between Sub and the Company, that was issued, acquired or
will be settled at a discount.
7. Following the Merger, Company will continue its historic business
or use a significant portion of its historic assets in a business.
8. At the time of the Merger, the Company will not have outstanding
any warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in the Company that, if
exercised or converted, would affect Parent's acquisition or retention of
control of the Company, as defined in section 368(c) of the Internal Revenue
Code.
9. The Company is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
10. On the date of the Merger, the fair market value of the assets of
the Company will exceed its liabilities plus the amount of liabilities, if any,
to which the assets are subject.
11. The Company is not under the jurisdiction of a court in a Title
11 or similar case, within the meaning of section 368(a)(3)(A) of the Internal
Revenue Code.
12. In the Merger, shares of Company stock representing control of
the Company, as defined in section 368 (c) of the Code, will be exchanged solely
for voting stock
<PAGE>
3
of Parent; for purposes of this representation, shares of Company stock
exchanged for cash or other property originating with Parent will be treated as
outstanding Company stock on the date of the Merger.
13. None of the compensation received by any shareholder-employees of
the Company will be separate consideration for, or allocable to, any of the
shares of Company Common Stock held by such shareholder-employees.
I understand that Shearman & Sterling, as counsel for Parent, will
rely on this representation letter in rendering its opinion concerning certain
of the federal income tax consequences of the Merger, and I hereby commit to
inform them if, for any reason, any of the foregoing representations ceases to
be true prior to the Effective Time.
EASTERN ENVIRONMENTAL
SERVICES, INC.
BY:
-------------------------
Name:
Title:
NYDOCS03/427700
<PAGE>
WASTE MANAGEMENT REPRESENTATION LETTER
____________, 1998
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-4676
Ladies and Gentlemen:
On behalf of Waste Management, Inc., a Delaware corporation ("Parent")
and Ocho Acquisition Corporation, a Delaware corporation and a direct wholly-
owned subsidiary of Parent ("Sub"), the undersigned, in connection with the
opinion to be delivered by you pursuant to section 8.3(b) of the Agreement and
Plan of Merger (the "Agreement"; terms used but not defined herein have the
meanings ascribed to them in the Agreement) dated as of August 16, 1998 among
Sub, Parent, and Eastern Environmental Services, Inc., a Delaware corporation
(the "Company") hereby certifies that, to the extent the facts relate to Parent
and Sub to his knowledge and after due diligence, and to the extent otherwise
without knowledge to the contrary,
1. The fair market value of the Parent Common Stock and other
consideration received by each shareholder of the Company will be approximately
equal to the fair market value of the Company Common Stock exchanged in the
Merger.
2. At least 50 percent of the value of the shareholders' proprietary
interests in the Company will be preserved as a proprietary interest in Parent
received in exchange for Company Common Stock. For purposes of this
representation, proprietary interests will not be preserved to the extent that,
in connection with the Merger: (i) an extraordinary distribution is made with
respect to the stock of the Company; (ii) a redemption or acquisition of stock
of the Company is made by the Company or a person related to the Company; (iii)
Parent or a person related to Parent acquires stock of the Company for
consideration other than Parent stock; or (iv) Parent redeems its stock issued
in the Merger. Any reference to Parent or the Company includes a reference to
any successor or predecessor of such corporation, except that the Company is not
treated as a predecessor of Parent. A corporation will be treated as related to
another corporation if they are both members of the same affiliated group within
the meaning of Section 1504 of the Code (without regard to the exceptions in
Section 1504(b)) or they are related as described in Section 304(a)(2) of the
Code (disregarding Treas. Reg. (S)1.1502-80(b)), in either case whether such
relationship exists immediately before or immediately after the acquisition.
Each partner of a partnership will be treated as owning or acquiring any stock
owned or acquired, as the case may be, by the partnership (and as having paid
any consideration paid by the partnership to acquire such stock) in accordance
with that partner's interest in the partnership. As used in this representation
letter, the term "partnership" shall have the same meaning given to it in
Section 7701(a)(2) of the Code.
<PAGE>
2
3. Following the Merger, the Company will hold at least 90 percent
of the fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair market
value of Sub's net assets and at least 70 percent of the fair market value of
the Sub's gross assets held immediately prior to the Merger. For purposes of
this representation, amounts paid by the Company or Sub to dissenters, amounts
paid by the Company or Sub to shareholders who receive cash or other property,
amounts used by the Company or Sub to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by the
Company will be included as assets of the Company or Sub, respectively,
immediately prior to the Merger.
4. Prior to the Merger, Parent will be in control of Sub within the
meaning of section 368(c) of the Code. For this purpose, the term "control"
means the ownership of stock possessing at least 80 percent of the total
combined voting power of all classes of stock entitled to vote and at least 80
percent of the total number of shares of all other classes of stock of the
corporation.
5. Parent has no present plan or intention to cause the Company to
issue additional shares of its stock that, assuming the Merger is consummated,
would result in Parent losing control of the Company within the meaning of
section 368(c) of the Internal Revenue Code.
6. Parent has no plan or intention to reacquire any of its stock
issued in the Merger.
7. Parent has no plan or intention to liquidate Company; to merge
Company with or into another corporation; to sell or otherwise dispose of the
stock of Company except for transfers of stock to corporations controlled by
Parent; or to cause Company to sell or otherwise dispose of any of its assets or
of any of the assets acquired from Sub, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation controlled
by Company.
8. Sub will have no liabilities assumed by Company, and will not
transfer to Company any assets subject to liabilities, in the Merger.
9. Each of the Parent, Sub, the Company and the shareholders of the
Company will pay their respective expenses, if any, incurred in connection with
the Merger.
10. There is no intercorporate indebtedness existing between Parent
and the Company, or between Sub and the Company, that was issued, acquired or
will be settled at a discount.
11. Following the Merger, Parent will cause Company to continue its
historic business or use a significant portion of its historic assets in a
business.
<PAGE>
3
12. Neither Parent nor Sub is an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
13. On the date of the Merger, the fair market value of the assets of
the Company will exceed its liabilities plus the amount of liabilities, if any,
to which the assets are subject.
14. The Company is not under the jurisdiction of a court in a Title
11 or similar case, within the meaning of section 368(a)(3)(A) of the Internal
Revenue Code.
15. In the Merger, shares of Company stock representing control of
the Company, as defined in section 368 (c) of the Code, will be exchanged solely
for voting stock of Parent; for purposes of this representation, shares of
Company stock exchanged for cash or other property originating with Parent will
be treated as outstanding Company stock on the date of the Merger.
16. None of the compensation received by any shareholder-employees of
the Company will be separate consideration for, or allocable to, any of the
shares of Company Common Stock held by such shareholder-employees.
17. Parent does not own, nor has it owned during the past five years,
stock of Company in excess of 2% of the total outstanding shares of the Company
Common Stock.
18. The payment of cash in lieu of fractional shares of Parent Common
Stock will be solely for purposes of avoiding the expense and inconvenience to
Parent of issuing fractional shares and does not represent separately bargained
for consideration.
I understand that Shearman & Sterling, as counsel for Parent, will
rely on this representation letter in rendering its opinion concerning certain
of the federal income tax consequences of the Merger, and I hereby commit to
inform them if, for any reason, any of the foregoing representations ceases to
be true prior to the Effective Time.
WASTE MANAGEMENT, INC.
BY:
--------------------------
Name:
Title:
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF DRINKER BIDDLE & REATH LLP]
September 25, 1998
Eastern Environmental Services, Inc.
1000 Crawford Place
Mt. Laurel, NJ 08054
Re: Agreement and Plan of Merger, dated as of
August 16, 1998, by and among Waste
Management, Inc., Ocho Acquisition Corporation
and Eastern Environmental Services, Inc.
----------------------------------------------
Ladies and Gentlemen:
You have requested our opinion, as counsel to Eastern Environmental
Services, Inc. (the "Company"), as to certain Federal income tax consequences of
the proposed merger of Ocho Acquisition Corporation ("Subsidiary"), a wholly
owned, directly held subsidiary of Waste Management, Inc. ("Parent"), with and
into the Company on the terms and conditions set forth in the Agreement and Plan
of Merger, dated as of August 16, 1998, by and among Parent, Subsidiary and the
Company (the "Plan of Merger"). Terms not otherwise defined in this letter shall
have the meanings ascribed to them in the Plan of Merger.
Each of the Company, Parent and Subsidiary is a Delaware corporation.
Subject to the approval of the Company Stockholders (defined below), pursuant to
the Plan of Merger, Subsidiary will merge with and into the Company, with the
Company continuing as the surviving corporation and as a wholly owned, directly
held subsidiary of Parent (the "Merger"). In the Merger, each holder of shares
of Company Common Stock (each, a "Company Stockholder" and, collectively, the
"Company Stockholders") shall receive shares of Parent Common Stock in the
manner provided in the Plan of Merger. Consummation of the Merger is subject to
the satisfaction of certain conditions set forth in the Plan of Merger.
The Company has filed with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act"), a
preliminary Proxy Statement/Prospectus (the "Company Proxy Statement") to obtain
the approval of the Merger of the Company Stockholders. Parent is filing today
with the SEC under the Securities Act, a
<PAGE>
Eastern Environmental Services, Inc.
September 25, 1998
Page 2
Registration Statement on Form S-4 (together with all amendments, including the
definitive Proxy Statement/Prospectus, schedules and exhibits thereto, the
"Parent Registration Statement") with respect to the Parent Common Stock
issuable pursuant to the Plan of Merger.
You have directed us to assume in preparing this opinion that (i) the Merger
will be consummated in accordance with the terms, conditions and other
provisions of the Plan of Merger, and that no term or condition therein has been
or will be waived or modified and (ii) all factual information, descriptions,
representations and assumptions set forth in this letter, in the Plan of Merger,
in the Parent Registration Statement, and in the Company Proxy Statement as
filed with the SEC are accurate and complete and will be accurate and complete
at the time the Merger becomes effective. In addition, we have assumed that
representations will be made by the Company and Parent in letters to us
substantially in the form attached hereto (the "Certification Letters") and have
assumed that such representations will be accurate and complete at the time the
Merger becomes effective.
We have not independently verified any factual matters relating to the
factual recitations in this opinion letter or the averments in the Plan of
Merger and the Certification Letters in connection with our preparation of this
opinion and, accordingly, our opinion does not take into account any matters not
set forth herein that might have been disclosed by such independent
verification.
Assuming that the Merger is consummated in accordance with the terms and
conditions set forth in the Plan of Merger and based on the facts set forth
therein, in the Certification Letters and this letter, including all assumptions
and representations, and subject to the qualifications and other matters set
forth therein and herein, it is our opinion that for Federal income tax purposes
the Merger will constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), that the Company,
Subsidiary and Parent each will be a "party to the reorganization" within the
meaning of Section 368(b) of the Code, and therefore, the Merger will have the
following material Federal income tax consequences:
(i) No gain or loss will be recognized by any of the Company, Parent or
Subsidiary as a result of the Merger;
(ii) No gain or loss will be recognized by any Company Stockholder upon
receipt of shares of Parent Common Stock in exchange for shares of
<PAGE>
Eastern Environmental Services, Inc.
September 25, 1998
Page 3
Company Common Stock in the Merger, except as discussed below with respect to
cash received by a Company Stockholder in lieu of a fractional share interest in
Parent Common Stock;
(iii) Each Company Stockholder who receives cash in lieu of a fractional
share of Parent Common Stock generally will recognize capital gain or loss in an
amount equal to the difference between the amount of cash received and the
portion of such Company Stockholder's basis in shares of Company Common Stock
that is allocable to the fractional share interest, provided that such Company
Stockholder holds his Company Common Stock as a capital asset (and provided that
the receipt of cash is not "substantially equivalent to a dividend" by reason of
such Company Stockholder's pre-existing direct or constructive ownership of
Parent Common Stock, if any);
(iv) The aggregate adjusted tax basis of the shares of Parent Common Stock
received by a Company Stockholder in the Merger will be the same as such
stockholder's aggregate adjusted tax basis in the shares of Company Common Stock
surrendered in exchange therefor; and
(v) The holding period of the shares of Parent Common Stock received by a
Company Stockholder in the Merger will include the holding period of the shares
of Company Common Stock surrendered in the Merger in exchange therefor, provided
that such shares of Company Common Stock are held as a capital asset on the date
of the Merger.
Our opinion is limited to the foregoing Federal income tax consequences of
the Merger, which are the only matters as to which you have requested our
opinion. We have not addressed any other Federal income tax consequences of the
Merger other than those specifically set forth herein and we have not considered
any matters (including state or local tax consequences of the Merger) arising
under the laws of any jurisdiction other than matters of Federal law arising
under the laws of the United States as expressly set forth herein.
Our opinion is based on the understanding that the relevant facts are, and
will continue to be as of the date of the consummation of the Merger, as set
forth or referred to in this letter. If this understanding is incorrect or
incomplete in any respect, our opinion could be affected. Our opinion is based
solely on the facts, representations and assumptions as expressed herein.
Further, our opinion represents our best legal judgment, but has no binding
effect or official status of any kind, and no assurance can be given that
contrary positions may not be taken by the Internal Revenue Service or a court
concerning certain issues. In issuing our opinion, we have relied solely upon
existing provisions of the Code, existing Treasury regulations
<PAGE>
Eastern Environmental Services, Inc.
September 25, 1998
Page 4
promulgated thereunder, and current administrative positions and judicial law.
Such laws, regulations, administrative positions and judicial decisions are
subject to change at any time, and any such change may be made with retroactive
effect. No assurances can be provided as to future judicial interpretations of
these laws or their effect on this opinion. We are not hereby undertaking to
advise you as to any changes in the laws, facts, or circumstances which may
hereafter occur or come to our attention. No assurance can be provided that
after any such change our opinion would not be different. Further, we undertake
no responsibility and are under no obligation to update or supplement our
opinion at any future time nor render any further opinion to you.
We hereby consent to the filing with the SEC of this opinion as an exhibit
to the Parent Registration Statement on Form S-4 relating to the shares of
Parent Common Stock that may be issued in connection with the Merger and to the
references to our firm under the captions "Conditions to the Merger," "Certain
Federal Income Tax Consequences" and "Legal Matters" in the Parent Registration
Statement and the Company Proxy Statement. This consent does not, however,
constitute consent under Section 7 of the Securities Act, and in consenting to
such references to our firm we have not certified any part of the Registration
Statement and we do not admit that we come within the categories of persons
whose consent is required under Section 7 or under the rules and regulations of
the SEC issued thereunder.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
<PAGE>
WASTE MANAGEMENT, INC.
1001 Fannin, Suite 4000
Houston, TX 77002
September __, 1998
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
Re: Agreement and Plan of Merger, dated as of August 16, 1998,
by and among Waste Management, Inc., Ocho Acquisition
Corporation and Eastern Environmental Services, Inc.
-----------------------------------------------------------
Ladies and Gentlemen:
Eastern Environmental Services, Inc., (the "Company") has requested your
opinion as to certain Federal income tax matters in connection with a proposed
merger pursuant to which the Company would merge with Ocho Acquisition
Corporation ("Subsidiary"), a wholly owned subsidiary of Waste Management, Inc.
("Parent"), with the Company continuing as the surviving corporation and a
wholly owned subsidiary of Parent (the "Merger"). The Merger is to be effected
pursuant to and in accordance with the Agreement and Plan of Merger, dated as of
August 16, 1998, by and among Parent, Subsidiary and the Company (the "Plan of
Merger"). Capitalized terms used but not otherwise defined in this letter shall
have the meanings ascribed to them in the Plan of Merger.
In order to assist you in rendering your opinion, Parent hereby makes the
following representations, which representations are true, accurate and complete
as of the date hereof:
1. The Merger will be consummated in compliance with the terms of the
Plan of Merger, and none of the material terms therein have been or will be
waived or modified.
2. The Merger will be effected for bona fide business reasons.
3. Subsidiary was organized by Parent under the laws of the State of
Delaware solely in order to effect the Merger, and Subsidiary does not and will
not have any assets (other than the minimum assets required for state law
capitalization purposes) or liabilities or engage in any activities other than
those incident to its formation and capitalization and the Merger.
4. The Exchange Ratio was negotiated through arm's length bargaining.
Accordingly, the fair market value of Parent Common Stock to be received by the
holders of the Company Common Stock in the Merger will be approximately equal
<PAGE>
to the fair market value of the Company Common Stock surrendered in the Merger
in exchange therefor.
5. Prior to the Merger, Parent will own all of the outstanding
capital stock of Subsidiary.
6. Immediately following the Merger, Parent will own directly all of
the issued and outstanding capital stock of the Company.
7. Following the Merger, Parent has no plan or intention of causing
or permitting the Company to issue additional shares of its stock that would
result in Parent losing control of the Company. For purposes of this letter,
"control" means the direct ownership of stock possessing at least 80% of the
total combined voting power for the election of directors of all classes
entitled to vote and at least 80% of the total number of each nonvoting class of
stock of the corporation.
8. Parent has no plan or intention to reacquire any of the Parent
Common Stock issued in the Merger.
9. At least 50 percent of the value of the shareholders' proprietary
interests in the Company will be preserved as a proprietary interest in Parent
received in exchange for Company Common Stock. For purposes of this
representation, proprietary interests will not be preserved to the extent that,
in connection with the Merger: (i) an extraordinary distribution is made with
respect to the stock of the Company; (ii) a redemption or acquisition of stock
of the Company is made by the Company or a person related to the Company; (iii)
Parent or a person related to Parent acquires stock of the Company for
consideration other than Parent stock; or (iv) Parent redeems its stock issued
in the Merger. Any reference to Parent or the Company includes a reference to
any successor or predecessor of such corporation, except that the Company is not
treated as a predecessor of Parent. A corporation will be treated as related to
another corporation if they are both members of the same affiliated group within
the meaning of Section 1504 of the Code (without regard to the exceptions in
Section 1504(b)) or they are related as described in Section 304(a)(2) of the
Code (disregarding Treas. Reg. Section 1502-80(b)), in either case, whether such
relationship exists immediately before or immediately after the acquisition.
Each partner of a partnership will be treated as owning or acquiring any stock
owned or acquired, as the case may be, by the partnership (and as having paid
any consideration paid by the partnership to acquire such stock) in accordance
with that partner's interest in the partnership. As used in this representation
letter, the term "partnership" shall have the same meaning given to it in
Section 7701(a)(2) of the Code.
10. Parent has no plan or intention to liquidate the Company; to merge
the Company with or into another corporation; to sell or otherwise dispose of
the stock of the Company; or to cause the Company to sell or otherwise dispose
of any of its assets, except for dispositions made in the ordinary course of
business or transfers of assets to corporations controlled by the Company.
11. Subsidiary will have no liabilities assumed by the Company in the
Merger, nor will Subsidiary transfer to the Company any assets subject to
liabilities pursuant to the Merger.
12. Following the Merger, the Company will continue its historic
business or use a significant portion of its historic business assets in a
business.
13. Parent, Subsidiary, the Company and the Company Shareholders will
pay their respective expenses, if any, incurred in connection with the Merger.
14. There is no intercorporate indebtedness existing between Parent
and the Company or between Subsidiary and the Company that was issued, acquired
or will be settled at a discount.
15. In the Merger, Parent will acquire shares of Company Common Stock
representing control of the Company solely in exchange for voting stock of
Parent. For purposes of this representation, Company Common Stock redeemed for
cash or other property furnished by Parent will be considered as acquired by
Parent.
2
<PAGE>
16. Parent does not own, nor has it owned during the past five years,
any shares of Company Common Stock.
17. Parent is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
18. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
Parent of issuing fractional shares and does not represent separately bargained
for consideration. In addition, this cash payment will not be made pro rata to
all Company stockholders. The total consideration that will be paid in the
Merger to the Company stockholders will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to the Company stockholders in
exchange for their shares of Company Common Stock.
19. None of the consideration received by any Company Shareholder who
also is an employee of the Company (a "Company Shareholder-Employee") will be
separate consideration for, or allocable to, any of their shares of Company
Common Stock. None of the Parent Common Stock received in the Merger by any
such Company Shareholder-Employee in exchange for his Company Common Stock will
be in exchange for, or in consideration of, services rendered to the Company or
Parent. The compensation paid to any Company Shareholder-Employee will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
We understand that you will, and we expressly authorize you to, rely upon
each of the foregoing representations in rendering your opinion of even date
herewith. We shall undertake to advise you promptly if we become aware of any
facts or circumstances that would cause any representation set forth herein to
be incorrect.
Very truly yours,
Waste Management, Inc.
By: _________________
Title:_________________
3
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 Crawford Place
Mt. Laurel, NJ 08054
_________ __, 1998
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
Re: Agreement and Plan of Merger, dated as of August 16, 1998,
by and among Waste Management, Inc., Ocho Acquisition
Corporation and Eastern Environmental Services, Inc.
-----------------------------------------------------------
Ladies and Gentlemen:
We have requested your opinion as to certain Federal income tax matters in
connection with a proposed merger pursuant to which Eastern Environmental
Services, Inc. (the "Company") would merge with Ocho Acquisition Corporation
("Subsidiary"), a wholly owned subsidiary of Waste Management, Inc. ("Parent"),
with the Company continuing as the surviving corporation and a wholly owned
subsidiary of Parent (the "Merger"). The Merger is to be effected pursuant to
and in accordance with the Agreement and Plan of Merger, dated as of August 16,
1998, by and among Parent, Subsidiary and the Company (the "Plan of Merger").
Capitalized terms used but not otherwise defined in this letter shall have the
meanings ascribed to them in the Plan of Merger.
In order to assist you in rendering your opinion, the Company hereby makes
the following representations, which representations are true, accurate and
complete as of the date hereof:
1. The Merger will be consummated in compliance with the terms of the
Plan of Merger, and none of the material terms therein have been or will be
waived or modified.
2. The Merger will be effected for bona fide business reasons.
3. The Exchange Ratio was negotiated through arm's length bargaining.
Accordingly, the fair market value of Parent Common Stock received by the
holders of the Company Common Stock in the Merger will be approximately equal to
the fair market value of the Company Common Stock surrendered in the Merger in
exchange therefor.
4. Immediately following the Merger, Parent will own directly all of
the issued and outstanding capital stock of the Company and therefore, Parent
will be in
<PAGE>
control of the Company. For purposes of this letter, "control" means the direct
ownership of stock possessing at least 80% of the total combined voting power
for the election of directors of all classes entitled to vote and at least 80%
of the total number of each nonvoting class of stock of the corporation.
5. Following the Merger, the Company will hold at least 90% of the
fair market value of the net assets and at least 70% of the fair market value of
the gross assets held by the Company immediately prior to the Merger, treating
any assets used by the Company to make distributions or redemptions other than
regular and normal distributions or redemptions as unacquired assets.
6. Parent, Subsidiary, the Company and the stockholders of the
Company will pay their respective expenses, if any, incurred in connection with
the Merger.
7. There is no intercorporate indebtedness existing between Parent
and the Company or between Subsidiary and the Company that was issued, acquired
or will be settled at a discount.
8. In the Merger, Parent will acquire shares of Company Common Stock
representing control of the Company solely in exchange for Parent voting stock.
For purposes of this representation, Company Common Stock redeemed for cash or
other property furnished by Parent will be considered as acquired by Parent.
9. At least 50 percent of the value of the shareholders' proprietary
interests in the Company will be preserved as a proprietary interest in Parent
received in exchange for Company Common Stock. For purposes of this
representation, proprietary interests will not be preserved to the extent that,
in connection with the Merger: (i) an extraordinary distribution is made with
respect to the stock of the Company; (ii) a redemption or acquisition of stock
of the Company is made by the Company or a person related to the Company; (iii)
Parent or a person related to Parent acquires stock of the Company for
consideration other than Parent stock; or (iv) Parent redeems its stock issued
in the Merger. Any reference to Parent or the Company includes a reference to
any successor or predecessor of such corporation, except that the Company is not
treated as a predecessor of Parent. A corporation will be treated as related to
another corporation if they are both members of the same affiliated group within
the meaning of Section 1504 of the Code (without regard to the exceptions in
Section 1504(b)) or they are related as described in Section 304(a)(2) of the
Code (disregarding Treas. Reg. Section 1502-80(b)), in either case, whether such
relationship exists immediately before or immediately after the acquisition.
Each partner of a partnership will be treated as owning or acquiring any stock
owned or acquired, as the case may be, by the partnership (and as having paid
any consideration paid by the partnership to acquire such stock) in accordance
with that partner's interest in the partnership. As used in this representation
letter, the term "partnership" shall have the same meaning given to it in
Section 7701(a)(2) of the Code.
10. At the time of the Merger, the Company will not have outstanding
any warrants, options, convertible securities or any other type right pursuant
to which any person could acquire stock in the Company that, if exercised or
converted, would affect Parent's acquisition or retention of control of the
Company.
11. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
12. On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities (including, without
limitation, any liabilities to which its assets are subject).
13. The Company is not under the jurisdiction of a court in a Title
11 of the United States Code or a receivership, foreclosure or similar
proceeding in any Federal or State court.
14. Shares of Company Common Stock are regularly traded on an
established securities market. No foreign persons hold five percent (5%) or
more of the shares of Company Common Stock.
15. No dividends or distributions will be made with respect to any
Company Common Stock prior to the Merger. After the Merger, no dividends or
2
<PAGE>
distributions will be made to the former stockholders of the Company, other than
dividend distributions made with regard to all shares of Parent Common Stock.
16. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
Parent of issuing fractional shares and does not represent separately bargained
for consideration. In addition, this cash payment will not be made pro rata to
all Company stockholders. The total consideration that will be paid in the
Merger to the Company stockholders will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to the Company stockholders in
exchange for their shares of Company Common Stock.
17. None of the consideration received by any Company Shareholder who
also is an employee of the Company (a "Company Shareholder-Employee") will be
separate consideration for, or allocable to, any of their shares of Company
Common Stock. None of the Parent Common Stock received in the Merger by any
such Company Shareholder-Employee in exchange for his Company Common Stock will
be in exchange for, or in consideration of, services rendered to the Company or
Parent. The compensation paid to any Company Shareholder-Employee will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
We understand that you will, and we expressly authorize you to, rely upon
each of the foregoing representations in rendering your opinion of even date
herewith. We shall undertake to advise you promptly if we become aware of any
facts or circumstances that would cause any representation set forth herein to
be incorrect.
Very truly yours,
Eastern Environmental Services, Inc.
By:
-------------------------------
Title:
----------------------------
3
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report on Waste Management, Inc. dated September 23, 1998
included in Waste Management, Inc.'s Current Report on Form 8-K dated
September 23, 1998 in this Registration Statement on Form S-4 and related
Prospectus of Waste Management, Inc. and to all references to our Firm
included in or incorporated by reference in this Registration Statement.
/s/ Arthur Andersen LLP
Houston, Texas
September 24, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4, relating to the pooling of interests with Eastern Environmental
Services, Inc., of our report dated March 16, 1998, on our audits of the
consolidated financial statements of USA Waste Services, Inc. We also consent
to the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers, LLP
Houston, Texas
September 24, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary,"
"Experts" and "Conditions" in the Proxy Statement of Eastern Environmental
Services, Inc. that is made part of the Registration Statement (Form S-4) and
Prospectus of Waste Management, Inc. for the registration of 25,155,000 shares
of common stock and to the incorporation by reference therein of our reports
dated:
(i) June 19, 1997 with respect to the combined financial statements of
Waste Services, Inc. and Affiliates, included in the Eastern
Environmental Services, Inc. Current Report on Form 8-K dated May 12,
1997 (as amended July 11, 1997 and July 25, 1997 on Form 8-K/A);
(ii) September 12, 1997 with respect to the financial statements of Pappy,
Inc. included in the Eastern Environmental Services, Inc. Current
Report on Form 8-K dated August 15, 1997 (as amended October 10, 1997
on Form 8-K/A);
(iii) December 12, 1997 with respect to the consolidated financial
statements of Pine Grove, Inc. included in the Eastern Environmental
Services, Inc. Current Report on Form 8-K dated December 1, 1997 (as
amended February 17, 1998 on Form 8-K/A); and
(iv) September 16, 1998 with respect to the consolidated financial
statements of Eastern Environmental Services, Inc. included in the
Eastern Environmental Services, Inc. Current Report on Form 8-K dated
September 22, 1998.
all filed with the Securities Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
September 24, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 and related Prospectus of Waste Management, Inc. of our report
dated August 19, 1996, with respect to the combined financial statements of
Allied Environmental Services, Inc., Allied Environmental Services West, Inc.,
Allied Mid-Atlantic, Inc. and Allied Waste Management, Inc. included in
Eastern Environmental Services, Inc.'s Current Report on Form 8-K dated July
2, 1996 (as amended on Form 8-K/A dated September 16, 1996, May 13, 1997, June
6, 1997 and July 10, 1997) filed with the Securities and Exchange Commission.
/s/ B.J. Klinger & Co., P.C.
---------------------------------
B.J. Klinger & Co., P.C.
Great Neck, New York
September 22, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
Allied Environmental Services, Inc. and Affiliates
Merrick, New York
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 and related Prospectus of Waste Management, Inc., of our
reports relating to the combined financial statements of Allied Environmental
Services, Inc. and affiliates dated October 12, 1995 (except Notes 1 and 7
which are June 25, 1996) for the five month period ended November 30, 1994 and
seven month period ended June 30, 1995 and November 12, 1996 for the year
ended June 30, 1996, included in Eastern Environmental Services, Inc.'s Form
8-K dated July 2, 1996 (as amended on Form 8-K/A dated September 16, 1996, May
13, 1997, June 6, 1997 and July 10, 1997).
/s/ BDO Seidman, LLP
---------------------------------
BDO Seidman, LLP
Philadelphia, Pennsylvania
September 22, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 and related Prospectus of Waste Management, Inc., of our reports
dated September 30, 1996, with respect to the combined comparative financial
statements of Super Kwik, Inc. and Waste Maintenance Services, Inc. included
in Eastern Environmental Services, Inc.'s Current Report on Form 8-K dated
September 27, 1996 (as amended on Form 8-K/A filed December 9, 1996, June 6,
1997 and July 10, 1997), filed with the Securities and Exchange Commission.
/s/ Bardall, Weintraub P.C.
---------------------------------
Bardall, Weintraub P.C.
Turnersville, New Jersey
September 22, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 and related Prospectus of Waste Management, Inc., of our reports
dated December 27, 1996, with respect to the audited financial statements of
R&A Bender, Inc., and R&A Bender Property, Ltd., included in Eastern
Environmental Services, Inc.'s Current Report on Form 8-K dated December 10,
1996 (as amended on Form 8-K/A filed February 11, 1997, June 6, 1997 and July
10, 1997), filed with the Securities and Exchange Commission.
/s/ Boyer & Ritter
---------------------------------
Chambersburg, Pennsylvania
September 22, 1998
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 and related Prospectus of Waste Management, Inc., of our report
dated March 3, 1997, with respect to the combined financial statements of
Donno Company, Inc. and affiliates included in Eastern Environmental Services,
Inc.'s Current Report on Form 8-K/A dated July 10, 1997 (amending the
Company's Form 8-K dated January 31, 1997), both filed with the Securities and
Exchange Commission.
/s/ Paternostro, Callahan &
DeFreitas, LLP
-------------------------------------
Paternostro, Callahan & DeFreitas,
LLP
Mineola, New York
September 22, 1998
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 and related Prospectus of Waste Management, Inc., of our reports
dated April 30, 1997, with respect to the financial statements of Apex Waste
Services, Inc. and Waste Management of Pennsylvania, Inc., Northeast
Pennsylvania Division, included in Eastern Environmental Services, Inc.'s
Current Report on Form 8-K dated March 31, 1997 (as amended on Form 8-K/A
filed May 15, 1997 and July 10, 1997) and August 29, 1997 with respect to the
financial statements of Soil Remediation of Philadelphia, Inc. and USA Waste
of Fairless Hills, Inc., included in Eastern Environmental Services, Inc.'s
Current Report on Form 8-K dated August 20, 1997 (as amended on Form 8-K/A
filed November 3, 1997) filed with the Securities and Exchange Commission.
/s/ David P. Irwin and Associates
P.C.
-------------------------------------
David P. Irwin and Associates P.C.
Stafford-Wayne, Pennsylvania
September 22, 1998
<PAGE>
EXHIBIT 23.10
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Waste Management, Inc. on Form S-4 of our report dated April 29, 1998, with
respect to the consolidated financial statements of Atlantic Waste Disposal,
Inc. and subsidiaries as of and for the years ended June 30, 1997 and 1996
appearing in Eastern Environmental Services, Inc.'s Current Report on Form 8-K
dated April 20, 1998 and filed with the Securities and Exchange Commission on
April 30, 1998.
/s/ Deloitte & Touche LLP
- ---------------------------------
Richmond, Virginia
September 22, 1998
<PAGE>
EXHIBIT 23.11
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-4) and related Prospectus of Waste Management, Inc., of our report
dated March 18, 1998, with respect to the financial statements of Bluegrass
Containment, Inc. included in Eastern Environmental Services, Inc.'s Current
Report on Form 8-K dated March 9, 1998 (as amended on Form 8-K/A dated April
8, 1998), filed with the Securities and Exchange Commission.
/s/ Strothman & Company P.S.C.
Louisville, Kentucky
September 22, 1998
<PAGE>
EXHIBIT 23.12
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-4) and related Prospectus of Waste Management, Inc., of our report
dated March 28, 1998, with respect to the financial statements of The Stamato
Companies included in Eastern Environmental Services, Inc.'s Current Report on
Form 8-K dated March 31, 1998 (as amended on Form 8-K/A dated April 24, 1998),
filed with the Securities and Exchange Commission.
/s/ Mills and DeFilippis LLP
-------------------------------------
Certified Public Accountants
Mountain Lake, New Jersey
September 22, 1998
<PAGE>
EXHIBIT 23.13
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 and related Prospectus of Waste Management, Inc., of our reports
dated August 21, 1998, with respect to the audited financial statements of All
Waste Systems, Inc. and Affiliated Companies and Ulster Sanitation, Inc. and
Affiliated Companies included in Eastern Environmental Services, Inc.'s
Current Report on Form 8-K dated September 22, 1998, filed with the Securities
and Exchange Commission.
/s/ Christopher Rayner & Associates
-----------------------------------
Rockville Centre, New York
September 22, 1998
<PAGE>
EXHIBIT 23.16
CONSENT OF SALOMON SMITH BARNEY
We hereby consent to (i) the inclusion of our opinion letter dated August
16, 1998 to the Board of Directors of Eastern Environmental Services, Inc. as
Annex B to the Proxy Statement/Prospectus constituting part of this
Registration Statement and (ii) the references to our firm under the captions
entitled "Summary" and "The Merger--Background of the Merger--Reasons for the
Merger; Recommendation of the Eastern Board--Opinion of Salomon Smith Barney"
in the Proxy Statement/Prospectus. In giving this consent, we do not admit
that we come within the category of persons whose consent is required under,
and we do not admit that we are "experts" for the purposes of, the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
/s/ Salomon Smith Barney
_________________________________
Salomon Smith Barney
New York, New York
September 22, 1998
<PAGE>
EXHIBIT 99.2
- --------------------------------------------------------------------------------
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 CRAWFORD PLACE, SUITE 400
MT. LAUREL, NEW JERSEY 08054
PROXY - Special Meeting of Stockholders - Thursday, November 5, 1998
THIS PROXY IS SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Gregory M. Krzemien and Robert M.
Kramer as proxies, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse
side hereof, all of the shares of Common Stock of Eastern Environmental
Services, Inc. (the "Company") held of record by the undersigned on September
25, 1998 at the Special Meeting of Stockholders to be held Thursday, November
5, 1998 or at any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED IN FAVOR OF THE PROPOSALS AND IN ACCORDANCE WITH THE PROXIES'
JUDGMENT UPON OTHER MATTERS PROPERLY COMING BEFORE THE MEETING AND ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
(Continued, and to be signed, on Reverse Side)
- ------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[x] Please mark your votes as in this example.
FOR AGAINST ABSTAIN
1. Proposal to approve and adopt the Agreement
and Plan of Merger dated as of August 16,
1998 among the Company, Waste Management,
Inc. and Ocho Acquisition Corporation [ ] [ ] [ ]
In their discretion, the Proxies are authorized, to the extent permitted by the
rules of the Securities and Exchange Commission, to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE ____________________________________ DATE __________________
SIGNATURE ____________________________________ DATE __________________
NOTE: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign with full corporation name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.3
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 CRAWFORD PLACE, SUITE 400
MT. LAUREL, NEW JERSEY 08054
SEPTEMBER [ ], 1998
Dear Stockholder:
On August 16, 1998, Eastern Environmental Services, Inc. ("Eastern") entered
into an agreement and plan of merger to merge with a wholly owned subsidiary
of Waste Management, Inc. ("Waste Management"). In the merger, each share of
Eastern common stock will be converted into the right to receive 0.6406 of a
share of Waste Management common stock, and Eastern will become a wholly owned
subsidiary of Waste Management. You will be asked to consider and approve the
merger agreement at a special meeting of stockholders on Thursday, November 5,
1998. The accompanying Proxy Statement/Prospectus presents the details of the
proposed merger.
EASTERN'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL AND ADOPTION.
FOR FURTHER INFORMATION REGARDING THE MERGER, I URGE THAT YOU CAREFULLY READ
THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND, SPECIFICALLY, THE SECTIONS
ENTITLED "THE MERGER--REASONS FOR THE MERGER; RECOMMENDATION OF THE EASTERN
BOARD" BEGINNING ON PAGE 21 AND "RISK FACTORS" BEGINNING ON PAGE 12. If you
have more questions about the merger or would like additional copies of the
accompanying Proxy Statement/Prospectus, you should contact: John W. Poling,
Eastern Investor Relations, 1000 Crawford Place, Suite 400, Mt. Laurel, New
Jersey 08054; telephone: (609) 235-6009. Even if you plan to attend the
special meeting in person, please complete, sign, and date and promptly return
the enclosed proxy card in the enclosed postage-prepaid envelope.
Sincerely,
/s/ Louis D. Paolino, Jr.
Louis D. Paolino, Jr.
Chairman of the Board,
Chief Executive Officer
and President
<PAGE>
EXHIBIT 99.4
EASTERN ENVIRONMENTAL SERVICES, INC.
1000 CRAWFORD PLACE, SUITE 400
MT. LAUREL, NEW JERSEY 08054
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 5, 1998
To the Stockholders of
EASTERN ENVIRONMENTAL SERVICES, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Eastern
Environmental Services, Inc., a Delaware corporation ("Eastern"), will be held
on Thursday, November 5, 1998, at the Radisson Hotel Mt. Laurel, 915 Route
73N, Mt. Laurel, New Jersey 08054 commencing at 10:00 a.m., local time, for
the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of August 16, 1998, among Waste Management,
Inc., a Delaware corporation ("Waste Management"), Ocho Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of
Waste Management ("Ocho Acquisition"), and Eastern, pursuant to which,
among other things (a) Ocho Acquisition will be merged with and into
Eastern, which will be the surviving corporation, and Eastern will become
a wholly owned subsidiary of Waste Management and (b) each outstanding
share of common stock of Eastern will be converted into the right to
receive 0.6406 of a share of common stock of Waste Management.
2. To transact such other business as may properly be brought before the
special meeting or any adjournment or postponement of the special
meeting.
A copy of the merger agreement is attached as Annex A to the accompanying
Proxy Statement/Prospectus.
Stockholders of record at the close of business on September 25, 1998 are
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement of the special meeting. A complete list of stockholders
entitled to vote at the special meeting will be available for inspection by
any stockholder for any purpose germane to the special meeting for 10 days
prior to the special meeting during ordinary business hours at Eastern's
headquarters located at 1000 Crawford Place, Suite 400, Mt. Laurel, New Jersey
08054.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to
complete, sign, date and return the enclosed proxy card as promptly as
possible in the enclosed postage-prepaid envelope.
By Order of the Board of Directors,
/s/ Robert M. Kramer
Robert M. Kramer
Secretary
Mt. Laurel, New Jersey
[Date]
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. DO NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
