<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
USA WASTE SERVICES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4953 73-1309529
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
Incorporation or Organization) Classification Code Number)
</TABLE>
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
USA WASTE SERVICES, 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:
<TABLE>
<S> <C>
JOHN A. MARZULLI, JR. CHARLES W. MULANEY, JR.
SHEARMAN & STERLING SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
599 LEXINGTON AVENUE 333 WEST WACKER DRIVE
NEW YORK, NY 10022 CHICAGO, IL 60606-1285
(212) 848-4000 (312) 407-0700
</TABLE>
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 Waste Management, Inc. ("Waste
Management") with and into Dome Merger Subsidiary, Inc., a wholly owned
subsidiary of the Registrant, 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
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING
TO BE REGISTERED BE REGISTERED (1) SECURITY PRICE (2)
<S> <C> <C> <C>
Common Stock, par value $0.01 per share................... 380,625,000 Not Applicable $16,389,870,000.00
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES AMOUNT OF
TO BE REGISTERED REGISTRATION FEE (3)
<S> <C>
Common Stock, par value $0.01 per share................... $4,835,011.65
</TABLE>
(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) 525,000,000, the sum of (i) the number of shares of common
stock of Waste Management, par value $1.00 per share ("Waste Management
Common Stock"), outstanding on May 31, 1998, (ii) the number of shares of
Waste Management Common Stock issuable pursuant to outstanding stock options
through the date the Merger is expected to be consummated, (iii) the number
of shares of Waste Management Common Stock issuable upon conversion, prior
to the date the Merger is expected to be consummated, of outstanding
convertible securities of Waste Management and (iv) the number of shares of
Waste Management Common Stock otherwise expected to be issued prior to the
date the Merger is expected to be consummated and (b) an exchange ratio of
0.725 of a share of Common Stock for each share of Waste Management 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 Waste Management Common
Stock to be exchanged in the Merger, as the product of (a) $31.2188 (the
average of the high and low sales prices per share of Waste Management
Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape on June 4, 1998) and (b) 525,000,000, the sum of (i) the
number of shares of Waste Management Common Stock outstanding on May 31,
1998, (ii) the number of shares of Waste Management Common Stock issuable
pursuant to outstanding stock options through the date the Merger is
expected to be consummated, (iii) the number of shares of Waste Management
Common Stock issuable upon conversion, prior to the date the Merger is
expected to be consummated, of outstanding convertible securities of Waste
Management and (iv) the number of shares of Waste Management 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 $3,088,162.92 paid on April 23, 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
$1,746,848.73.
------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 5, 1998
USA WASTE SERVICES, INC.
AND
WASTE MANAGEMENT, INC.
-------------------
JOINT PROXY STATEMENT
-------------------
USA WASTE SERVICES, INC. PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock, par value $0.01 per share ("USA Waste Common Stock"), of USA Waste
Services, Inc., a Delaware corporation ("USA Waste"), in connection with the
solicitation of proxies by the Board of Directors of USA Waste (the "USA Waste
Board") for use at a Special Meeting of Stockholders of USA Waste (the "USA
Waste Special Meeting") to be held on Wednesday, July 15, 1998, at the Four
Seasons Hotel, 1300 Lamar, Houston, Texas, commencing at 3:00 p.m., local time,
and at any adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
common stock, par value $1.00 per share ("Waste Management Common Stock"), of
Waste Management, Inc., a Delaware corporation ("Waste Management"), in
connection with the solicitation of proxies by the Board of Directors of Waste
Management (the "Waste Management Board") for use at the Special Meeting of
Stockholders of Waste Management (the "Waste Management Special Meeting") to be
held on Wednesday, July 15, 1998 at the offices of Harris Trust and Savings
Bank, 111 West Monroe Street, Chicago, Illinois, commencing at 2:00 p.m., local
time, and at any adjournment or postponement thereof.
USA Waste has filed a Registration Statement on Form S-4 (including the
exhibits and any amendments thereto, the "USA Waste Registration Statement")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
covering up to 380,625,000 shares of USA Waste Common Stock which may be issued
pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of March 10, 1998, among USA Waste, Dome Merger Subsidiary, Inc., a Delaware
corporation and a wholly-owned subsidiary of USA Waste ("Dome Merger
Subsidiary"), and Waste Management, in exchange for outstanding shares of Waste
Management Common Stock (including shares that may become outstanding prior to
the closing of the Merger (as defined below) upon the exercise of options for
the purchase of Waste Management Common Stock, the conversion of convertible
securities of Waste Management or other issuance by Waste Management). This
Joint Proxy Statement/Prospectus constitutes the Prospectus of USA Waste
comprising a part of the USA Waste Registration Statement. The Merger Agreement
is attached as Annex A to this Joint Proxy Statement/ Prospectus and is
incorporated herein by reference. Pursuant to the Merger Agreement, Dome Merger
Subsidiary will be merged with and into Waste Management (the "Merger"). Waste
Management will be the surviving corporation in the Merger as a wholly-owned
subsidiary of USA Waste, and each outstanding share of Waste Management Common
Stock will be converted into the right to receive 0.725 of a share of USA Waste
Common Stock. Based upon the number of outstanding shares of USA Waste Common
Stock and Waste Management Common Stock as of June 9, 1998, and assuming the
issuance by Waste Management of 20 million shares of Waste Management Common
Stock prior to the Merger, the shares of USA Waste Common Stock issued to Waste
Management stockholders in the Merger would represent approximately 60% of the
shares of USA Waste Common Stock outstanding immediately following the closing
of the Merger. On June 9, 1998, the last reported sale price of USA Waste Common
Stock on the New York Stock Exchange (the "NYSE") Composite Transaction Tape was
$[ ] per share, and the last reported sale price of Waste Management Common
Stock on the NYSE Composite Transaction Tape was $[ ] per share.
Upon the closing of the Merger (and subject to the approval by USA Waste's
stockholders of the related amendment to its Restated Certificate of
Incorporation, as described elsewhere in this Joint Proxy Statement/
Prospectus), USA Waste will change its name to "Waste Management, Inc." (the
combined company after giving effect to the Merger is referred to herein as "New
Waste Management" or the "combined company").
All information contained in this Joint Proxy Statement/Prospectus relating
to USA Waste has been supplied by USA Waste, and all information relating to
Waste Management has been supplied by Waste Management.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY BOTH USA WASTE AND WASTE MANAGEMENT STOCKHOLDERS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of USA Waste and Waste Management on or
about June 12, 1998.
The date of this Joint Proxy Statement/Prospectus is June [ ], 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS............. (iii)
SUMMARY.................................. 1
SELECTED HISTORICAL AND SUMMARY COMBINED
UNAUDITED PRO FORMA CONDENSED FINANCIAL
INFORMATION............................ 9
COMPARATIVE PER SHARE DATA............... 15
MARKET PRICE AND DIVIDEND INFORMATION.... 16
RISK FACTORS............................. 17
Risks Relating to the Merger........... 17
Risks Inherent in the Industry or
Particular to USA Waste or Waste
Management........................... 18
THE SPECIAL MEETINGS..................... 21
The USA Waste Special Meeting.......... 21
The Waste Management Special Meeting... 24
THE MERGER............................... 26
Background of the Merger............... 26
Reasons for the Merger; Recommendations
of the Boards of Directors........... 29
Opinions of Financial Advisors......... 34
Interests of Certain Persons in the
Merger............................... 43
Directors and Executive Officers of the
Combined Company Following the
Merger............................... 48
Certain Federal Income Tax
Consequences......................... 52
Accounting Treatment................... 53
Regulatory Approvals................... 53
Federal Securities Laws Consequences... 54
Stock Exchange Quotation............... 54
No Appraisal Rights.................... 54
Certain Legal Proceedings.............. 55
THE MERGER AGREEMENT..................... 56
General................................ 56
Exchange of Shares..................... 56
Representations and Warranties......... 57
Certain Covenants...................... 58
Governmental Consents.................. 59
No Solicitation........................ 60
Directors and Chief Executive Officer
of the Combined Company.............. 60
Pooling Matters........................ 61
Stock Options and Employee Benefits.... 61
Director and Officer Indemnification... 62
Conditions to the Merger............... 63
Termination of the Merger Agreement.... 65
Termination Fees and Expenses.......... 65
Amendment and Waiver................... 66
THE COMPANIES............................ 67
USA Waste.............................. 67
Waste Management....................... 68
New Waste Management................... 70
COMPARATIVE PER SHARE DATA............... 73
MARKET PRICE AND DIVIDEND INFORMATION.... 74
Market Prices.......................... 74
Dividends.............................. 75
COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS................... 76
DESCRIPTION OF USA WASTE CAPITAL STOCK... 86
Authorized Capital Stock............... 86
Common Stock........................... 86
Preferred Stock........................ 86
DGCL and Certain Provisions of the USA
Waste Charter........................ 86
Transfer Agent and Registrar........... 87
COMPARISON OF STOCKHOLDER RIGHTS......... 88
Number, Classification and Removal of
Directors............................ 88
Advance Notice of Stockholder
Proposals............................ 88
Voting Requirements and Quorums of
Stockholders......................... 89
Right to Call Special Meetings......... 89
Action by Written Consent of
Stockholders......................... 89
Transactions with Interested
Stockholders; DGCL Section 203....... 89
Certain Restrictions on Repurchases of
Securities........................... 90
Amendment of Charter and Bylaws........ 90
APPROVAL OF AMENDMENT TO THE USA WASTE
AMENDED AND RESTATED 1993 STOCK
INCENTIVE PLAN......................... 92
APPROVAL OF AMENDMENT TO THE USA WASTE
1996 STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS.............................. 94
STOCKHOLDER PROPOSALS.................... 95
LEGAL MATTERS............................ 95
EXPERTS.................................. 95
WHERE YOU CAN FIND MORE INFORMATION...... 96
Annex A-- Agreement and Plan of Merger... A-1
Annex B-- Opinion of Donaldson, Lufkin &
Jenrette Securities
Corporation..................... B-1
Annex C-- Opinion of Merrill Lynch,
Pierce, Fenner & Smith
Incorporated.................... C-1
Annex D-- Form of Amendments to the
Restated Certificate of
Incorporation of USA Waste
Services, Inc................... D-1
</TABLE>
i
<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<S> <C>
1993 Plan Proposal................... 2
1996 Plan Proposal................... 2
ARCO................................. 49
Arthur Andersen...................... 53
BFI.................................. 51
BHMS................................. 70
broker non-votes..................... 23
Chambers............................. 11
Charter Proposal..................... 2
Chrysler............................. 50
Closing Date......................... 63
Closing Price........................ 47
Code................................. 45
combined company..................... Cover
Commission........................... 20
Competing Transaction................ 60
Coopers & Lybrand.................... 53
CWM.................................. 13
DCF.................................. 37
DGCL................................. 54
DLJ.................................. 4
DLJ Opinion.......................... 29
DOJ.................................. 7
Dome Merger Subsidiary............... Cover
EBIT................................. 36
EBITDA............................... 36
Effective Time....................... 56
EPS.................................. 35
Excess Shares........................ 56
Exchange Act......................... 70
Exchange Agent....................... 56
Exchange Ratio....................... 4
Expected Synergies................... 40
FTC.................................. 7
General Chemical..................... 50
Group One............................ 35
Group Three.......................... 35
Group Two............................ 35
HSR Act.............................. 6
Interested Person.................... 90
Interested Stockholder............... 89
IRS.................................. 52
Limited Partnership.................. 26
LTM.................................. 36
M&A Transactions..................... 36
Merger............................... Cover
Merger Agreement..................... Cover
Merrill Lynch........................ 4
Merrill Lynch Opinion................ 39
New Waste Management................. Cover
New Waste Management Board........... 5
New Waste Management Common Stock.... 44
NYSE................................. Cover
Option Spread........................ 47
P/E ratio............................ 41
Permitted Acquisitions............... 58
Plus Plan............................ 46
Relational Investors................. 27
Retention Incentive Awards........... 46
Rust................................. 13
S-3 Registration Statement........... 61
second request....................... 7
Section 203.......................... 89
Securities Act....................... Cover
SERP................................. 4
SERP Lump Sum Payment................ 46
Share Issuance Proposal.............. 2
SMMI................................. 50
Solid Waste Companies................ 35
Surviving Corporation................ 56
Synergies............................ 35
Tax Opinions......................... 52
Ten-Day Average Price................ 38
U.S. Filter.......................... 50
U.S. GAAP............................ 35
USA Waste............................ Cover
USA Waste 1993 Plan.................. 2
USA Waste 1996 Plan.................. 2
USA Waste Board...................... Cover
USA Waste Charter.................... 2
USA Waste Common Stock............... Cover
USA Waste Preferred Stock............ 86
USA Waste Record Date................ 22
USA Waste Registration Statement..... Cover
USA Waste Special Meeting............ Cover
Waste Management..................... Cover
Waste Management 1997 Form 10-K...... (iii)
Waste Management Board............... Cover
Waste Management Common Stock........ Cover
Waste Management Notes............... 69
Waste Management Record Date......... 24
Waste Management Series A Preferred
Stock.............................. 91
Waste Management Special Meeting..... Cover
Waste Management Stock Option........ 61
Waste Services Group................. 41
Western.............................. 11
WM International..................... 1
WMI Merger Sub....................... 61
WMNA................................. 1
WTI.................................. 1
</TABLE>
ii
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and under the captions "Risk Factors",
"The Merger -- Reasons for the Merger; Recommendations of the Boards of
Directors", "The Companies", "Combined Unaudited Pro Forma Condensed Financial
Statements" and "Notes to Combined Unaudited Pro Forma Condensed Financial
Statements", and elsewhere in this Joint Proxy Statement/Prospectus, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements also include those
preceded by, followed by or that include the words "believes", "expects",
"anticipates" or similar expressions. 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 the ability of
the companies to meet price increase 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. The companies 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, USA Waste and Waste
Management stockholders should consider carefully the information set forth
herein under "Risk Factors" and "The Companies" and under the captions
"Business", "Legal Proceedings" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Parts I and II of USA Waste's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and the
information set forth under the captions "Business", "Legal Proceedings" and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in Parts I and II of Waste Management's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "Waste Management 1997 Form
10-K"), both of which are incorporated by reference herein. Other factors and
assumptions not identified above were also involved in the derivation of these
forward-looking statements, and the failure of such other assumptions to be
realized as well as other factors may also cause actual results to differ
materially from those projected. Neither USA Waste nor Waste Management 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 96).
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 JOINT
PROXY STATEMENT/ PROSPECTUS, PLEASE SEE "LIST OF DEFINED TERMS" (PAGE II).
THE COMPANIES (PAGE 67)
USA WASTE SERVICES, INC.
1001 Fannin, Suite 4000
Houston, Texas 77002
(713) 512-6200
USA Waste is the third largest integrated solid waste management company in
North America, as measured by revenues for the 1997 fiscal year, and currently
serves, through its subsidiaries, the full spectrum of commercial, industrial,
municipal and residential customers in 48 states, the District of Columbia,
Canada and Puerto Rico. USA Waste's solid waste management services include
collection, transfer and disposal operations and, to a lesser extent, recycling
and certain other waste management services. USA Waste, through its
subsidiaries, owns or operates an extensive network of landfills, transfer
stations and collection operations and has a diversified customer base in excess
of seven million.
WASTE MANAGEMENT, INC.
3003 Butterfield Road
Oak Brook, Illinois 60523
(630) 572-8800
Waste Management is a leading international provider of waste management
services. Waste Management operates throughout the United States and in select
international markets through its principal subsidiaries, Waste Management of
North America, Inc. ("WMNA"), Wheelabrator Technologies Inc. ("WTI") and Waste
Management International plc ("WM International").
DOME MERGER SUBSIDIARY, INC.
1001 Fannin, Suite 4000
Houston, Texas 77002
(713) 512-6200
Dome Merger Subsidiary is a Delaware corporation formed by USA Waste on
February 27, 1998 for use in the Merger. This is the only business of Dome
Merger Subsidiary.
NEW WASTE MANAGEMENT
New Waste Management will be a leading international provider of waste
management services. New Waste Management will be the largest waste management
services company in North America and will have an extensive network of
landfills, collection operations and transfer stations throughout North America.
The corporate headquarters of New Waste Management will be located in Houston,
Texas, and New Waste Management is expected to maintain regional offices in the
Chicago, Illinois area.
OUR REASONS FOR THE MERGER (PAGE 29)
We believe that the Merger represents a unique strategic opportunity for USA
Waste and Waste Management, two companies with similar business operations and
complementary geographical presence, and that the combined company will have an
experienced and talented senior management team, as well as some of the highest
quality assets in the waste management industry. We believe that New Waste
Management will have greater financial strength, operational efficiencies,
earnings power and growth potential than either USA Waste or Waste Management
would have on its own.
1
<PAGE>
To review the reasons for the Merger in greater detail, as well as the risks
of the Merger, see pages 17 through 33.
PURPOSES OF THE SPECIAL MEETINGS
(PAGES 21 THROUGH 25)
USA WASTE. The purpose of the USA Waste Special Meeting is to consider and
vote upon:
- a proposal to amend USA Waste's Restated Certificate of Incorporation (the
"USA Waste Charter") to increase the number of authorized shares of USA
Waste Common Stock from 500,000,000 to 1,500,000,000 and to change the
name of USA Waste to "Waste Management, Inc." (the "Charter Proposal"), in
each case at the time of the Merger;
- a proposal to issue up to 380,625,000 shares of USA Waste Common Stock in
exchange for shares of Waste Management Common Stock pursuant to the
Merger Agreement (the "Share Issuance Proposal");
- a proposal to approve an amendment to the USA Waste Amended and Restated
1993 Stock Incentive Plan (the "USA Waste 1993 Plan") increasing the
aggregate number of shares of USA Waste Common Stock that may be issued
thereunder from 16,500,000 to 26,500,000 (the "1993 Plan Proposal");
- a proposal to approve an amendment to the USA Waste 1996 Stock Option Plan
for Non-Employee Directors (the "USA Waste 1996 Plan") increasing the
aggregate number of shares of USA Waste Common Stock that may be issued
thereunder from 400,000 to 1,400,000 (the "1996 Plan Proposal"); and
- such other business as may properly be brought before the USA Waste
Special Meeting.
WASTE MANAGEMENT. The purpose of the Waste Management Special Meeting is 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 Waste Management
Special Meeting.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS (PAGES 29 THROUGH 33)
USA WASTE. The USA Waste Board has unanimously approved the Merger
Agreement, the Charter Proposal, the Share Issuance Proposal, the 1993 Plan
Proposal and the 1996 Plan Proposal and unanimously recommends that holders of
USA Waste Common Stock vote in favor of the Charter Proposal, the Share Issuance
Proposal, the 1993 Plan Proposal and the 1996 Plan Proposal.
WASTE MANAGEMENT. The Waste Management Board has unanimously approved the
Merger Agreement and the transactions contemplated thereby, including the
Merger, and unanimously recommends that holders of Waste Management Common Stock
vote in favor of the approval and adoption of the Merger Agreement.
DATE, TIMES AND PLACES OF THE SPECIAL MEETINGS (PAGES 21 THROUGH 25)
USA WASTE. The USA Waste Special Meeting will be held on Wednesday, July
15, 1998, at the Four Seasons Hotel, 1300 Lamar, Houston, Texas, commencing at
3:00 p.m., local time.
WASTE MANAGEMENT. The Waste Management Special Meeting will be held on
Wednesday, July 15, 1998, at the offices of Harris Trust and Savings Bank, 111
West Monroe Street, Chicago, Illinois, commencing at 2:00 p.m., local time.
STOCKHOLDERS ENTITLED TO VOTE AT THE SPECIAL MEETINGS; VOTES REQUIRED
(PAGES 21 THROUGH 25)
USA WASTE. The close of business on June 9, 1998 is the record date for the
USA Waste Special Meeting. Only USA Waste
2
<PAGE>
stockholders on the record date are entitled to notice of and to vote at the USA
Waste Special Meeting. On the record date, there were [ ] shares of USA
Waste Common Stock outstanding. Each share of USA Waste Common Stock will be
entitled to one vote on each matter to be acted upon at the USA Waste Special
Meeting.
A majority vote of the shares of USA Waste Common Stock outstanding on the
record date is required to approve the Charter Proposal. A majority vote of the
shares of USA Waste Common Stock cast on the Share Issuance Proposal is required
to approve the Share Issuance Proposal. A majority vote of the shares of USA
Waste Common Stock present and allowed to vote at the USA Waste Special meeting
is required to approve the 1993 Plan Proposal and the 1996 Plan Proposal.
WASTE MANAGEMENT. The close of business on June 9, 1998 is the record date
for the Waste Management Special Meeting. Only Waste Management stockholders on
the record date are entitled to notice of and to vote at the Waste Management
Special Meeting. On the record date, there were [ ] shares of Waste
Management Common Stock outstanding. Each share of Waste Management Common Stock
will be entitled to one vote on each matter to be acted upon at the Waste
Management Special Meeting.
A majority vote of the shares of Waste Management Common Stock outstanding
on the record date is required to adopt the Merger Agreement.
INTERESTS OF CERTAIN PERSONS/STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
OF
USA WASTE AND WASTE MANAGEMENT
(PAGES 43 THROUGH 48 AND 67 THROUGH 70)
USA WASTE. In determining how to vote at the USA Waste Special Meeting, USA
Waste stockholders should be aware that certain officers and directors of USA
Waste may have interests in the Merger that are different from your and their
interests as stockholders. These include the following:
- Six members of the USA Waste Board will serve as initial directors of the
combined company.
- Certain executive officers of USA Waste, including Messrs. Drury, Proto
and DeFrates, will continue to serve as executive officers of the combined
company following the Merger.
As of May 1, 1998, current directors and executive officers of USA Waste
owned an aggregate of approximately 23,957,817 shares of USA Waste Common Stock,
or approximately [ ]% of the shares of USA Waste Common Stock entitled to vote
at the USA Waste Special Meeting. Each of such directors and executive officers
of USA Waste has advised USA Waste that he or she intends to vote all such
shares in favor of the approval of the Charter Proposal, the Share Issuance
Proposal, the 1993 Plan Proposal and the 1996 Plan Proposal.
WASTE MANAGEMENT. In determining how to vote at the Waste Management
Special Meeting, Waste Management stockholders should be aware that certain
officers and directors of Waste Management may have interests in the Merger that
are different from your and their interests as stockholders. These include the
following:
- Seven members of the Waste Management Board will serve as initial
directors of the combined company.
- As of May 1, 1998, approximately 2,777,618 shares of Waste Management
Common Stock were subject to options granted to executive officers and
directors under compensatory equity-based plans of Waste Management. All
outstanding options which have not yet become exercisable, other than
stock options granted on or after March 10, 1998, will become exercisable
upon a change in control of Waste Management. Certain awards of restricted
stock granted to certain executive officers and directors of Waste
Management will vest and, in some cases, all restrictions thereon will
lapse, at the time of the
3
<PAGE>
Merger. The Merger will be a change in control of Waste Management within
the meaning of such plans.
- As a result of the Merger, executive officers who participate in Waste
Management's Supplemental Executive Retirement Plan (the "SERP") will
receive credit for additional years of service over their severance
periods and become vested in any benefits accrued thereunder.
Additionally, the SERP will be terminated prior to the Merger and all
accrued benefits will be paid to participants in a lump sum.
- Certain executive officers of Waste Management have been granted retention
incentive awards that will be paid to them on the later of April 1, 1999
or six months following the Merger. If an executive officer's employment
is previously involuntarily or constructively terminated, such award will
be paid as of the termination date.
- New Waste Management will guarantee the indemnification obligations of
Waste Management to each present and former director and officer of Waste
Management.
As of May 1, 1998, current directors and executive officers of Waste
Management owned an aggregate of approximately 1,104,339 shares of Waste
Management Common Stock, representing less than 1% of the shares of Waste
Management Common Stock entitled to vote at the Waste Management Special
Meeting. Each of such directors and executive officers of Waste Management has
advised Waste Management that he or she intends to vote all such shares in favor
of the adoption of the Merger Agreement.
OPINIONS OF FINANCIAL ADVISORS
(PAGES 34 THROUGH 43)
USA WASTE. In deciding to approve the Merger, the USA Waste Board
considered the opinion of its financial advisor as to the fairness of the
Exchange Ratio (as defined below) to USA Waste. On March 10, 1998, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") delivered its oral opinion,
subsequently confirmed in writing, to the USA Waste Board that, as of such date,
the Exchange Ratio was fair to USA Waste from a financial point of view. The
full text of the written opinion of DLJ, which sets forth assumptions made,
matters considered and limitations on the review undertaken, is attached hereto
as Annex B and is incorporated herein by reference. HOLDERS OF USA WASTE COMMON
STOCK SHOULD READ THE DLJ OPINION IN ITS ENTIRETY.
WASTE MANAGEMENT. In deciding to approve the Merger, the Waste Management
Board considered the opinion of its financial advisor as to the fairness of the
Exchange Ratio to the Waste Management stockholders. On March 10, 1998, Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") delivered its
written opinion to the Waste Management Board that, as of such date, the
Exchange Ratio was fair from a financial point of view to the holders of Waste
Management Common Stock other than USA Waste or its affiliates. This opinion was
confirmed in writing as of June 5, 1998. The full text of the written opinion of
Merrill Lynch, which sets forth assumptions made, matters considered and
limitations on the review undertaken, is attached hereto as Annex C and is
incorporated herein by reference. HOLDERS OF WASTE MANAGEMENT COMMON STOCK
SHOULD READ THE MERRILL LYNCH OPINION IN ITS ENTIRETY.
THE MERGER
EFFECTS OF THE MERGER (PAGE 56)
In the Merger, Dome Merger Subsidiary will be merged with and into Waste
Management. Waste Management will be the surviving corporation and will become a
wholly-owned subsidiary of USA Waste. As a result of the Merger, Waste
Management stockholders will receive 0.725 of a share of USA Waste Common Stock
for each share of Waste Management Common Stock that they own (the "Exchange
Ratio"). Waste Management stockholders will not receive fractional shares of USA
Waste Common Stock. Instead, they will receive a cash payment for any fractional
shares
4
<PAGE>
they might otherwise have been entitled to receive, based on the market value of
the USA Waste Common Stock. Each outstanding share of USA Waste Common Stock
will remain outstanding and be unaffected by the Merger.
Each outstanding option or warrant to purchase Waste Management Common Stock
will be converted into an option or warrant to purchase a number of shares of
USA Waste Common Stock (rounded down to the nearest whole number) equal to the
product of:
- the number of shares of Waste Management Common Stock issuable upon
exercise of such option immediately prior to the Merger; and
- the Exchange Ratio.
The exercise price per share of each converted option (rounded up to the
nearest whole cent) will be equal to the result of:
- the exercise price per share of Waste Management Common Stock under the
original option or warrant, divided by
- the Exchange Ratio.
The Waste Management Board has amended certain of Waste Management's option
plans that entitle option holders, for a one-year period after the Merger, to
sell their options to New Waste Management for cash following the occurrence of
a "change in control" such as the Merger. The amendments provide that payment
for such options may, in the discretion of the committee of the Board of
Directors of New Waste Management administering such plans, be made in shares of
common stock of the combined company rather than cash.
OWNERSHIP OF THE COMBINED COMPANY FOLLOWING THE MERGER (PAGE 56)
Based upon the number of outstanding shares of USA Waste Common Stock and
Waste Management Common Stock as of the record date, and assuming the issuance
by Waste Management of 20 million shares of Waste Management Common Stock prior
to the Merger, the Waste Management stockholders immediately prior to the
consummation of the Merger are expected to own approximately 60% of the
outstanding shares of common stock of the combined company immediately following
consummation of the Merger.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY FOLLOWING THE MERGER
(PAGES 48 THROUGH 51)
The Board of Directors of New Waste Management immediately following the
Effective Time (the "New Waste Management Board"), will consist of the following
14 people: Ralph F. Cox, John E. Drury, Richard J. Heckmann, Richard D. Kinder,
Rodney R. Proto, Ralph V. Whitworth and Jerome B. York (all of whom are nominees
and, with the exception of Mr. Whitworth, are currently directors of USA Waste),
H. Jesse Arnelle, Pastora San Juan Cafferty, Roderick M. Hills, Robert S.
Miller, Paul M. Montrone, John C. Pope and Steven G. Rothmeier (all of whom are
nominees and currently directors of Waste Management). Mr. Hills is expected to
become the Chairman of the Audit Committee of the New Waste Management Board and
Mr. York is expected to become the Chairman of the Special Integration Committee
of the New Waste Management Board.
At the Effective Time, Robert S. Miller, who is currently Chairman of the
Board and Chief Executive Officer of Waste Management, will become non-executive
Chairman of the New Waste Management Board for a 12-month term; John E. Drury,
who is currently Chairman of the Board and Chief Executive Officer of USA Waste,
will remain Chief Executive Officer of New Waste Management; Rodney R. Proto,
who is currently President and Chief Operating Officer of USA Waste, is expected
to remain President and Chief Operating Officer of New Waste Management; and
Earl E. DeFrates, who is currently Executive Vice President and Chief Financial
Officer of USA Waste, is expected to remain Executive Vice President and Chief
Financial Officer of New Waste Management. Following the expiration of Mr.
Miller's 12-month term as non-executive Chairman of the New Waste Management
Board, Mr. Drury will become the Chairman of
5
<PAGE>
the Board and Chief Executive Officer of New Waste Management.
CONDITIONS TO THE MERGER
(PAGES 63 THROUGH 64)
Our obligations to complete the Merger are subject to the satisfaction or
waiver of several conditions, including the following:
- USA Waste stockholders must approve the Charter Proposal and the Share
Issuance Proposal;
- Waste Management stockholders must approve and adopt the Merger Agreement;
- there must not be any court order which effectively prohibits the Merger;
- the waiting period (and any extension thereof) applicable to the Merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and other similar laws, must come to an end;
- all relevant governmental authorities must approve the Merger;
- each company's independent accountants must provide a letter regarding
their respective concurrence with the conclusions of each company's
management that the Merger will qualify for pooling of interests
accounting treatment;
- the shares of USA Waste Common Stock to be issued in the Merger and to be
issued upon exercise of the Waste Management stock options must be
authorized for listing on the NYSE;
- each company must certify to the other that its representations and
warranties contained in the Merger Agreement are materially true and
correct and that it has performed all of its material obligations under
the Merger Agreement;
- no event or events shall have occurred or be reasonably likely to occur
which shall have had, or could reasonably be expected to have, a material
adverse effect with respect to either company;
- each company must receive an opinion from its tax counsel that the Merger
will qualify as a tax-free reorganization; and
- certain individuals must be appointed to their positions as directors
and/or executive officers.
The party entitled to the benefit of some of these conditions may waive
these conditions.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES AND EXPENSES (PAGES 65
THROUGH 66)
The companies 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 Merger is not completed by October 31, 1998 (although either company
may unilaterally extend such date under certain circumstances to December
30, 1998);
- a court or other governmental authority permanently prohibits the Merger;
- the board of directors of the other party (i) changes its recommendation
of the Merger, in the exercise of its fiduciary duties to its
stockholders, (ii) recommends a "competing transaction" to its
stockholders or (iii) does not recommend against acceptance of a tender
offer or exchange offer for 25% or more of its outstanding capital stock;
- the Waste Management stockholders do not approve and adopt the Merger
Agreement or the USA Waste stockholders do not approve the Charter
Proposal or the Share Issuance Proposal;
- the other party materially breaches the Merger Agreement and does not use
reasonable efforts to cure such breach; or
- the board of directors of either company determines that its fiduciary
obligations
6
<PAGE>
require it to change its recommendation to its stockholders at a time when
another party has announced a "competing transaction" that is more
favorable than the Merger to its stockholders.
Under certain circumstances, if the Merger Agreement is terminated, either
USA Waste or Waste Management may be required to reimburse the other party for
expenses of up to $20 million or to pay the other party a termination fee of
$275 million, in the case of payment by Waste Management to USA Waste, or $183
million, in the case of payment by USA Waste to Waste Management.
REGULATORY APPROVALS (PAGES 53 THROUGH 54)
The HSR Act prohibits USA Waste and Waste Management from completing the
Merger until we furnish certain information to the Antitrust Division of the
U.S. Department of Justice (the "DOJ") and the U.S. Federal Trade Commission
(the "FTC"), and a required waiting period has expired or been terminated. On
March 24, 1998, USA Waste and Waste Management submitted the required filings to
the DOJ and the FTC, and on April 23, 1998 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 be terminated
20 days following substantial compliance by both USA Waste and Waste Management
with the second request.
NO APPRAISAL RIGHTS (PAGE 54)
Neither holders of Waste Management Common Stock nor holders of USA Waste
Common Stock are entitled to appraisal rights under Delaware law in connection
with the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (PAGES 52 THROUGH 53)
None of USA Waste, Waste Management or the Waste Management stockholders
will recognize any gain or loss for federal income tax purposes (except that
Waste Management stockholders who receive cash instead of fractional shares may
recognize a gain in respect of that cash for federal income tax purposes). It is
a condition to the Merger that USA Waste and Waste Management each have received
an opinion of counsel to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL 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 53)
We expect the Merger to qualify as a pooling of interests for accounting and
financial reporting purposes, which means that we will treat our companies as if
they had always been combined for accounting and financial reporting purposes.
It is a condition to the Merger that each of our independent accountants provide
a letter regarding their respective concurrence with the conclusions of each
company's management that the Merger will qualify as a pooling of interests.
In order to permit the Merger to qualify as a pooling of interests, Waste
Management has agreed in the Merger Agreement to complete a public offering of
shares of Waste Management Common Stock prior to the Effective Time to reverse
certain share repurchases effected by Waste Management, and it is currently
expected that Waste Management will issue approximately 20 million shares to do
so. The Waste Management Board has amended certain of Waste Management's option
plans that entitle option holders, for a one-year period following the
occurrence of a "change in control", such as the Merger, to sell their options
to New Waste Management. The amendments provide that payment for such options
may, in the discretion of the committee of the Board of Directors of New Waste
Management administering such plans, be made in shares of common stock of the
combined company rather than cash. In addition, Waste Management agreed
7
<PAGE>
that it would cooperate with USA Waste to conduct one or more registered
exchange offers to exchange outstanding Waste Management stock options for
shares of USA Waste Common Stock as of the Effective Time, although USA Waste is
not required to conduct any such exchange offer.
RISK FACTORS (PAGES 17 THROUGH 21)
There are risk factors that should be considered by the USA Waste
stockholders in evaluating how to vote at the USA Waste Special Meeting and by
the Waste Management stockholders in evaluating how to vote at the Waste
Management Special Meeting. Such risk factors include the following:
- fixed exchange ratio despite change in relative stock prices;
- uncertainties in integrating business operations and of realizing expected
synergies and cost savings;
- risks generally associated with acquisitions and the expansion of USA
Waste's existing operations; and
- risks inherent in the industry or particular to USA Waste or Waste
Management, including those related to competition, government regulation
and potential environmental liability.
SURRENDER OF CERTIFICATES
(PAGES 56 THROUGH 57)
Following the Effective Time, New Waste Management will mail a letter to all
former Waste Management stockholders containing instructions for surrendering
their stock certificates in exchange for certificates representing shares of
common stock of the combined company and a cash payment in lieu of fractional
shares, if any. Certificates representing shares of USA Waste Common Stock will
automatically represent shares of common stock of the combined company following
the Merger. WASTE MANAGEMENT STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
AT THIS TIME. USA WASTE STOCKHOLDERS SHOULD NOT AT ANY TIME SURRENDER THEIR
STOCK CERTIFICATES.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS (PAGE III)
USA Waste and Waste Management have each made forward-looking statements in
this document (and in documents that are incorporated by reference in this Joint
Proxy Statement/Prospectus) that are subject to certain risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of USA Waste, Waste Management and New
Waste Management. Also, when we use words such as "believes," "expects,"
"anticipates" or similar expressions, we are making forward-looking statements.
Stockholders should note that many factors, some of which are discussed
elsewhere in this document and in the documents which we incorporate herein by
reference, could affect the future financial results of USA Waste, Waste
Management and New Waste Management and could cause those results to differ
materially from those expressed in this document. Among others, these factors
include operating, legal and regulatory risks, as well as economic, consumer and
competitive forces affecting our businesses.
8
<PAGE>
SELECTED HISTORICAL AND SUMMARY COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
The following selected historical financial information of USA Waste and
Waste Management for each of the five years in the period ended December 31,
1997 has been derived from their respective audited historical financial
statements. The following selected historical financial information of USA Waste
and Waste Management as of and for the three months ended March 31, 1997 and
1998 has been derived from their respective unaudited historical financial
statements and reflect all adjustments the respective managements consider
necessary for a fair presentation of the financial position and results of
operations for these periods. The selected historical financial information
should be read in conjunction with the respective historical financial
statements and notes thereto incorporated by reference herein. See "Where You
Can Find More Information".
The summary combined unaudited pro forma condensed financial information is
derived from the combined unaudited pro forma condensed financial statements,
appearing elsewhere herein, which give effect to the Merger by combining the
results of operations of USA Waste and Waste Management using the pooling of
interests method of accounting as if the Merger had been consummated as of the
beginning of the periods presented, and should be read in conjunction with such
pro forma financial statements and notes thereto. The combined unaudited pro
forma condensed financial statements as of March 31, 1998 and for the years
ended December 31, 1995, 1996 and 1997 and the three months ended March 31, 1998
were prepared based on the respective historical financial statements of USA
Waste and Waste Management.
The combined unaudited pro forma condensed financial information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have been achieved had
the Merger been consummated as of the beginning of the periods presented, nor is
it necessarily indicative of the future operating results or financial position
of New Waste Management. The combined unaudited pro forma condensed financial
information does not give effect to any possible divestitures of business units
(including those which may be required by the antitrust regulatory authorities)
or to any cost savings which may result from the integration of USA Waste's and
Waste Management's operations nor does such information include the nonrecurring
costs directly related to the Merger which are expected to be included in
operations of New Waste Management within the 12 months following the Merger.
Such nonrecurring costs have yet to be determined; however, such costs are
expected to be significant.
9
<PAGE>
USA WASTE SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues....................... $ 887,972 $1,043,687 $1,216,082 $1,649,131 $2,613,768 $ 460,484 $ 769,440
--------- --------- --------- --------- --------- --------- ---------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below)........ 514,483 596,868 672,117 881,401 1,345,769 241,318 397,492
General and administrative............. 144,623 159,097 169,686 200,101 284,946 53,677 81,916
Depreciation and amortization.......... 108,024 127,108 143,878 191,044 303,241 56,178 86,110
Merger costs........................... -- 3,782 26,539 126,626 109,411 1,996 --
Unusual items.......................... 2,672 8,863 4,733 63,800 24,720 -- --
--------- --------- --------- --------- --------- --------- ---------
769,802 895,718 1,016,953 1,462,972 2,068,087 353,169 565,518
--------- --------- --------- --------- --------- --------- ---------
Income from operations................... 118,170 147,969 199,129 186,159 545,681 107,315 203,922
--------- --------- --------- --------- --------- --------- ---------
Other income (expenses):
Shareholder litigation settlement and
other litigation related costs....... (5,500) (79,400) -- -- -- -- --
Interest expense:
Nonrecurring......................... -- (1,254) (10,994) -- -- -- --
Other................................ (50,737) (54,102) (58,619) (60,497) (104,261) (16,098) (38,368)
Interest income........................ 5,072 5,085 6,682 6,699 7,634 2,053 1,799
Other income, net...................... 1,749 2,629 4,891 6,376 14,213 3,646 34,251
--------- --------- --------- --------- --------- --------- ---------
(49,416) (127,042) (58,040) (47,422) (82,414) (10,399) (2,318)
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item..................... 68,754 20,927 141,089 138,737 463,267 96,916 201,604
Provision for income taxes............... 29,170 8,959 60,313 70,398 189,944 38,954 80,642
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item......... 39,584 11,968 80,776 68,339 273,323 57,962 120,962
Extraordinary item related to early
retirement of debt, net of taxes....... -- -- -- -- (6,293) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................... $ 39,584 $ 11,968 $ 80,776 $ 68,339 $ 267,030 $ 57,962 $ 120,962
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings per common share:
Income before extraordinary item....... $ 0.32 $ 0.08 $ 0.56 $ 0.39 $ 1.31 $ 0.30 $ 0.55
Extraordinary item..................... -- -- -- -- (0.03) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 0.32 $ 0.08 $ 0.56 $ 0.39 $ 1.28 $ 0.30 $ 0.55
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per common share:
Income before extraordinary item....... $ 0.32 $ 0.08 $ 0.54 $ 0.37 $ 1.26 $ 0.29 $ 0.52
Extraordinary item..................... -- -- -- -- (0.03) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 0.32 $ 0.08 $ 0.54 $ 0.37 $ 1.23 $ 0.29 $ 0.52
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Dividends per common share............... $ -- $ -- $ -- $ -- $ -- $ -- $ --
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.......................... $ 37,565 $ 1,901 $ 26,134 $ 31,842 $ 86,736 $ 148,997 $ 177,910
Intangible assets, net................... 196,353 250,551 433,944 804,251 1,645,985 1,110,900 2,031,811
Total assets............................. 1,617,422 1,833,099 2,455,102 3,631,547 6,622,845 4,591,544 7,589,405
Long-term debt, including current
maturities............................. 711,014 759,123 909,050 1,504,888 2,763,729 1,732,825 3,631,414
Stockholders' equity..................... 623,510 688,603 1,149,885 1,473,990 2,628,976 2,118,698 2,775,122
</TABLE>
10
<PAGE>
- ------------------------
Notes:
(1) The results of operations in 1997 include charges for merger costs that
primarily related to a pooling of interests with United Waste Systems, Inc.,
and unusual items for the closure and abandonment of certain landfills and
transfer stations and reserves for various other terminated projects.
(2) In 1996, USA Waste recorded merger costs primarily related to its poolings
of interests with Western Waste Industries ("Western") and Sanifill, Inc.,
and unusual items primarily related to retirement benefits associated with
Western's pre-merger retirement plan, estimated future losses related to
municipal solid waste contracts in California as a result of the continuing
decline in prices of recyclable materials, estimated losses related to the
disposition of certain non-core business assets, project reserves related to
certain operations in Mexico, and various other terminated projects.
(3) USA Waste's results of operations in 1995 include merger costs primarily
related to its merger with Chambers Development Company, Inc. ("Chambers")
and nonrecurring interest related to extension fees and other charges
associated with the refinancing of Chambers' pre-merger debt.
(4) The 1994 results of operations include nonrecurring charges primarily
related to shareholder litigation costs incurred in connection with a
settled class action of consolidated suits on similar claims alleging
federal securities law violations against Chambers, certain of its officers
and directors, its former auditors, and the underwriters of its securities.
11
<PAGE>
WASTE MANAGEMENT SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................... $7,827,280 $8,537,883 $9,100,225 $9,225,636 $9,188,582 $2,204,985 $2,131,621
---------- ---------- ---------- ---------- ---------- ---------- ----------
Costs and expenses................ $6,560,716 $7,090,342 $7,606,679 $7,756,225 $8,324,613 $1,947,344 $1,885,867
Asset impairment loss............. 29,009 33,970 53,772 64,729 1,480,262 5,905 --
Special charges................... 524,767 -- 335,587 370,735 145,990 15,916 --
Gains from stock transactions of
subsidiaries and exchange of
Exchangeable LYONs.............. (15,109) -- -- -- -- -- --
Other (income) expenses, net...... 175,729 299,423 232,540 373,480 291,390 (5,796) 74,786
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income
taxes........................... $ 552,168 $1,114,148 $ 871,647 $ 660,467 $(1,053,673) $ 241,616 $ 170,968
Provision for income taxes........ 283,347 512,683 451,741 436,473 215,667 127,231 96,551
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations...................... $ 268,821 $ 601,465 $ 419,906 $ 223,994 $(1,269,340) $ 114,385 $ 74,417
Income (loss) from discontinued
operations...................... 19,886 27,324 4,863 (263,301) 95,688 647 --
Extraordinary item................ -- -- -- -- (516) -- --
Accounting changes................ -- (1,281) (84,672) -- (1,936) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........... $ 288,707 $ 627,508 $ 340,097 $ (39,307) $(1,176,104) $ 115,032 $ 74,417
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Average common shares
outstanding..................... 484,885 483,748 485,346 489,171 466,601 483,993 455,096
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic earnings (loss) per share:
Continuing operations........... $ 0.55 $ 1.24 $ 0.86 $ 0.46 $ (2.72) $ 0.24 $ 0.16
Discontinued operations......... 0.05 0.06 0.01 (0.54) 0.20 -- --
Extraordinary item.............. -- -- -- -- -- -- --
Accounting changes.............. -- -- (0.17) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........... $ 0.60 $ 1.30 $ 0.70 $ (0.08) $ (2.52) $ 0.24 $ 0.16
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Diluted earnings (loss) per share:
Continuing operations........... $ 0.55 $ 1.24 $ 0.86 $ 0.46 $ (2.72) $ 0.23 $ 0.16
Discontinued operations......... 0.04 0.06 0.01 (0.54) 0.20 -- --
Extraordinary item.............. -- -- -- -- -- -- --
Accounting changes.............. -- -- (0.17) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........... $ 0.59 $ 1.30 $ 0.70 $ (0.08) $ (2.52) $ 0.23 $ 0.16
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Dividends per share............... $ 0.58 $ 0.60 $ 0.60 $ 0.63 $ 0.67 $ 0.16 $ 0.17
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)......... $ (232,665) $ (682,017) $(1,047,078) $ (280,923) $(2,046,899) $ (502,443) $(2,329,447)
Intangible assets, net............ 3,230,826 3,406,897 3,892,355 3,871,919 3,198,374 3,728,860 3,686,079
Total assets...................... 15,716,369 16,444,947 17,457,159 17,083,577 13,589,098 16,667,655 13,864,000
Long-term debt, including current
maturities...................... 6,897,786 6,899,223 7,478,074 7,525,100 6,627,022 7,203,395 7,300,049
Stockholders' equity.............. 3,682,143 3,907,150 4,042,646 3,741,761 1,345,652 3,773,057 1,354,893
</TABLE>
12
<PAGE>
- ------------------------
Notes:
(1) As a result of a comprehensive review begun in the third quarter of 1997,
Waste Management determined that certain items of expense were incorrectly
reported in previously issued financial statements. Waste Management has
accordingly restated its prior financial results. See Note 2 to consolidated
financial statements incorporated by reference herein.
(2) Waste Management recorded an asset impairment loss in 1997, and restated
prior year financial statements to retroactively recognize impairment losses
in earlier years. See Note 16 to consolidated financial statements
incorporated by reference herein.
(3) The results for 1993 include a non-taxable gain of $15.1 million (before
minority interest), relating to the issuance of shares by Rust International
Inc. ("Rust"), as well as a special asset revaluation and restructuring
charge of $524.8 million (before tax and minority interest) recorded by
Chemical Waste Management, Inc. ("CWM") related primarily to a revaluation
of its thermal treatment business, and a provision of approximately $14
million to adjust deferred income taxes resulting from the 1993 tax law
change.
(4) The results for 1995 include a special charge of $140.6 million (before tax)
recorded by CWM, primarily to write off its investment in facilities and
technologies that it abandoned because they do not meet customer service or
performance objectives, and a special charge of $194.6 million (before tax
and minority interest) recorded by WM International relating to actions it
had decided to take to sell or otherwise dispose of non-core business and
investments, as well as core businesses and investments in low potential
markets, abandon certain hazardous waste treatment and processing
technologies, and streamline its country management organization.
(5) In 1995, the Rust Board of Directors approved a plan to sell or otherwise
discontinue Rust's process engineering, construction, specialty contracting
and similar lines of business. During 1996, the sale of the industrial
process engineering and construction business, based in Birmingham, Alabama,
was completed. In 1996, WTI sold its water process systems and equipment
manufacturing business, and Rust sold its industrial scaffolding business.
WTI entered into an agreement to sell its water and wastewater facility
operations and privatization business and Rust began implementing plans to
exit its remaining domestic and international engineering and consulting
business. These businesses were classified as discontinued operations in the
financial statements. The Rust disposition was not completed within one
year, and accordingly in 1997 this business has been reclassified back into
continuing operations, as operations held for sale, in accordance with
generally accepted accounting principles. The unused portion ($87.0 million)
of the previously recorded provision for loss on disposal was reversed in
discontinued operations, and an impairment loss provision of $122.2 million
was recognized in continuing operations.
(6) The results for 1996 include special charges of $47.1 million (before tax
and minority interest) related to WM International's sale of its investment
in Wessex Water Plc and a charge of $169.5 million (before tax and minority
interest) to revalue its investments in France, Austria and Spain in
contemplation of exiting these markets and to write off an investment in a
hazardous waste disposal facility. Also in 1996, WMNA and CWM recorded
special charges of $154.1 million (before tax) for reengineering their
finance and administration functions and increasing reserves for certain
litigation.
(7) In 1997, Waste Management recorded a special charge of $41.6 million
(pretax) for severance related to WMNA, and WM International recorded a
charge of $104.4 million (before tax and minority interest) to reflect costs
of demobilization following the loss of the contract renewal for Buenos
Aires, Argentina, divestiture or closure of underperforming businesses, and
the writeoff of projects it decided to no longer pursue.
(8) In 1995, Waste Management changed its accounting for capitalized interest on
landfill cell construction. See Note 3 to consolidated financial statements
incorporated by reference herein.
13
<PAGE>
SUMMARY COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- -------------
1995 1996 1997 1998
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $10,316,307 $10,874,767 $11,802,350 $ 2,901,061
---------- ---------- ---------- -------------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)............................................ 6,176,196 6,498,708 7,479,745 1,757,707
General and administrative................................ 1,260,192 1,294,471 1,413,244 345,581
Depreciation and amortization............................. 1,178,896 1,256,727 1,382,356 351,458
Merger costs.............................................. 26,539 126,626 109,411 --
Unusual items............................................. 394,092 499,264 1,650,972 --
(Income) loss from continuing operations held for sale, net
of minority interest...................................... (25,110) (315) 9,930 2,416
---------- ---------- ---------- -------------
9,010,805 9,675,481 12,045,658 2,457,162
---------- ---------- ---------- -------------
Income (loss) from operations............................... 1,305,502 1,199,286 (243,308) 443,899
---------- ---------- ---------- -------------
Other income (expense):
Interest expense:
Nonrecurring............................................ (10,994) -- -- --
Other................................................... (522,480) (522,921) (551,149) (153,942)
Interest income........................................... 41,565 34,603 45,214 6,109
Minority interest......................................... (81,367) (41,289) (45,442) (25,302)
Other income, net......................................... 257,586 108,390 126,172 70,323
---------- ---------- ---------- -------------
(315,690) (421,217) (425,205) (102,812)
---------- ---------- ---------- -------------
Income (loss) from continuing operations before income
taxes..................................................... 989,812 778,069 (668,513) 341,087
Provision for income taxes.................................. 492,885 486,616 361,464 161,815
---------- ---------- ---------- -------------
Income (loss) from continuing operations.................... $ 496,927 $ 291,453 $(1,029,977) $ 179,272
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------
Basic earnings (loss) per common share from continuing
operations................................................ $ 1.00 $ 0.55 $ (1.88) $ 0.33
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------
Diluted earnings (loss) per common share from continuing
operations................................................ $ 0.99 $ 0.54 $ (1.88) $ 0.32
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)................................... $(1,537,137)
Intangible assets, net...................................... 5,651,426
Total assets................................................ 21,248,259
Long-term debt, including current maturities................ 10,317,063
Stockholders' equity........................................ 4,644,650
</TABLE>
14
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth for the periods and as of the dates indicated
(a) certain unaudited historical per share data of USA Waste and Waste
Management; (b) combined unaudited pro forma per share data after giving effect
to the Merger under the pooling of interests method of accounting as if the
Merger had been consummated as of the beginning of the periods presented (and
assuming the issuance of 0.725 of a share of USA Waste Common Stock in exchange
for each outstanding share of Waste Management Common Stock); and (c) the Waste
Management equivalent combined unaudited pro forma per share data attributable
to the 0.725 of a share of USA Waste Common Stock that will be received by Waste
Management stockholders for each share of Waste Management Common Stock. This
data should be read in conjunction with the selected historical financial
information and the combined unaudited pro forma condensed financial statements
included elsewhere in this Joint Proxy Statement/Prospectus and the separate
historical financial statements of USA Waste and Waste Management incorporated
by reference herein. The combined unaudited pro forma financial data are not
necessarily indicative of the operating results or financial position that would
have been achieved if the Merger had been consummated as of the beginning of the
periods presented, nor are they necessarily indicative of the future operating
results or financial position of New Waste Management.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -----------
1995 1996 1997 1998
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
HISTORICAL -- USA WASTE
Basic earnings per common share:
Income before extraordinary item.......................................... $ 0.56 $ 0.39 $ 1.31 $ 0.55
Extraordinary item........................................................ -- -- (0.03) --
--------- --------- --------- -----------
Net income................................................................ $ 0.56 $ 0.39 $ 1.28 $ 0.55
--------- --------- --------- -----------
--------- --------- --------- -----------
Diluted earnings per common share:
Income before extraordinary item.......................................... $ 0.54 $ 0.37 $ 1.26 $ 0.52
Extraordinary item........................................................ -- -- (0.03) --
--------- --------- --------- -----------
Net income................................................................ $ 0.54 $ 0.37 $ 1.23 $ 0.52
--------- --------- --------- -----------
--------- --------- --------- -----------
Book value per common share................................................. $ 12.62
Tangible book value per common share........................................ 3.38
HISTORICAL -- WASTE MANAGEMENT
Basic earnings (loss) per common share:
Continuing operations..................................................... $ 0.86 $ 0.46 $ (2.72) $ 0.16
Discontinued operations................................................... 0.01 (0.54) 0.20 --
Extraordinary item........................................................ -- -- -- --
Cumulative effect of changes in accounting principles..................... (0.17) -- -- --
--------- --------- --------- -----------
Net income (loss)......................................................... $ 0.70 $ (0.08) $ (2.52) $ 0.16
--------- --------- --------- -----------
--------- --------- --------- -----------
Diluted earnings (loss) per common share:
Continuing operations..................................................... $ 0.86 $ 0.46 $ (2.72) $ 0.16
Discontinued operations................................................... 0.01 (0.54) 0.20 --
Extraordinary item........................................................ -- -- -- --
Cumulative effect of changes in accounting principles..................... (0.17) -- -- --
--------- --------- --------- -----------
Net income (loss)......................................................... $ 0.70 $ (0.08) $ (2.52) $ 0.16
--------- --------- --------- -----------
--------- --------- --------- -----------
Cash dividends per common share............................................. $ 0.60 $ 0.63 $ 0.67 $ 0.17
Book value per common share................................................. 2.98
Tangible book value per common share........................................ (5.12)
COMBINED UNAUDITED PRO FORMA
Basic earnings (loss) per common share from continuing operations........... $ 1.00 $ 0.55 $ (1.88) $ 0.33
Diluted earnings (loss) per common share from continuing operations......... 0.99 0.54 (1.88) 0.32
Cash dividends per common share............................................. 0.59 0.58 0.57 0.14
Book value per common share................................................. 8.23
Tangible book value per common share........................................ (1.78)
WASTE MANAGEMENT EQUIVALENT COMBINED UNAUDITED PRO FORMA
Basic earnings (loss) per common share from continuing operations........... $ 0.73 $ 0.40 $ (1.36) $ 0.24
Diluted earnings (loss) per common share from continuing operations......... 0.72 0.39 (1.36) 0.23
Cash dividends per common share............................................. 0.43 0.42 0.41 0.10
Book value per common share................................................. 5.97
Tangible book value per common share........................................ (1.29)
</TABLE>
15
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICES
The following table presents trading information for USA Waste Common Stock
and Waste Management Common Stock on March 10, 1998 and June 9, 1998. March 10,
1998 was the last full trading day prior to our announcement of the signing of
the Merger Agreement. June 9, 1998 was the last practicable trading day for
which information was available prior to the date of this Joint Proxy
Statement/Prospectus. You should read the information presented below in
conjunction with "Market Price and Dividend Information" on pages 74 through 75.
<TABLE>
<CAPTION>
WASTE MANAGEMENT
USA WASTE
COMMON STOCK COMMON STOCK
DOLLARS PER SHARE DOLLARS PER SHARE
-------------------- --------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
--------- --------- --------- ---------
March 10, 1998............................................................. $ 40.00 $ 37.88 $ 25.19 $ 24.25
June 9, 1998............................................................... $ $ $ $
</TABLE>
On March 10, 1998, the last reported sale price per share of USA Waste
Common Stock on the NYSE Composite Transaction Tape was $39.13 and the last
reported sale price per share of Waste Management Common Stock on the NYSE
Composite Transaction Tape was $25.19. On June 9, 1998, the last reported sale
price per share of USA Waste Common Stock on the NYSE Composite Transaction Tape
was $[ ], and the last reported sale price per share of Waste Management
Common Stock on the NYSE Composite Transaction Tape was $[ ]. Based solely on
the Exchange Ratio, the pro forma equivalent value of Waste Management Common
Stock at the close of trading on March 10, 1998 was $28.37 per share.
The market prices of shares of USA Waste Common Stock and Waste Management
Common Stock fluctuate. Because of this, we urge you to obtain current market
quotations.
DIVIDENDS
USA Waste has never paid cash dividends on USA Waste Common Stock; Waste
Management has paid cash dividends on Waste Management Common Stock since 1976.
However, Waste Management recently adopted a new dividend policy, substantially
reducing the amount of its quarterly dividend to $0.01 per share commencing with
the dividend declared in the second quarter of 1998. The decision whether to
apply legally available funds to the payment of dividends on common stock of New
Waste Management will be made by the New Waste Management Board from time to
time in the exercise of its business judgment.
16
<PAGE>
RISK FACTORS
The following risk factors, in addition to the other information contained
or incorporated by reference in this Joint Proxy Statement/Prospectus, should be
considered by holders of USA Waste Common Stock and by holders of Waste
Management Common Stock in determining how to vote at the USA Waste Special
Meeting and the Waste Management Special Meeting.
RISKS RELATING TO THE MERGER
FIXED EXCHANGE RATIO. The fraction of a share of USA Waste Common Stock
into which each share of Waste Management Common Stock is to be converted in the
Merger is fixed. The market value of USA Waste Common Stock and/or Waste
Management Common Stock at the Effective Time 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 USA Waste or
Waste Management, 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 USA Waste Common Stock and Waste Management Common
Stock, the relative market values of the USA Waste Common Stock issued in the
Merger and the Waste Management 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.
IMPACT OF MERGER ON USA WASTE. Successful consummation of the Merger will
alter the nature of USA Waste's business by significantly expanding USA Waste's
domestic and international operations and by adding operations, such as
hazardous waste management services and waste-to-energy operations. If the
Merger is consummated, the financial position of the combined company is
expected to be more leveraged than USA Waste's current financial position, which
may, among other things, limit the combined company's ability to incur
additional indebtedness. The success of the Merger will depend upon a number of
factors, most importantly the ability of the combined company to realize
expected synergies from the combined operations of Waste Management and USA
Waste.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS; REALIZATION OF
SYNERGIES. Integrating the operations and management of the two companies will
be a detailed, time-consuming process. The managements of USA Waste and Waste
Management have said they expect that annualized synergies and cost savings of
approximately $800 million pre-tax will be realized from the Merger. There can
be no assurance that this integration will result in the achievement of all of
the anticipated synergies and other benefits expected to be realized from the
Merger or that this integration will occur without the combined company
experiencing the loss of key USA Waste or Waste Management personnel. In
addition, USA Waste and Waste Management expect to incur certain nonrecurring
costs directly related to the Merger which are expected to be included in
operations of New Waste Management within the 12 months following the Merger.
Such nonrecurring costs have yet to be determined; however, such costs are
expected to be significant. Furthermore, USA Waste and Waste Management expect
that the DOJ will require divestitures of assets of USA Waste and Waste
Management in connection with any decision not to object to the Merger (see "The
Merger -- Regulatory Approvals -- Hart-Scott-Rodino"). Any such divestitures or
other commitments required by the DOJ could limit the synergies, cost savings
and other benefits expected. There can be no assurance that USA Waste and Waste
Management will agree to such divestitures or that, if agreed to, such
divestitures will not have a material adverse effect on New Waste Management.
Moreover, the integration of these organizations will require the dedication of
management resources, which may temporarily distract attention from the
day-to-day business of the combined company. The inability of management to
successfully or timely integrate the operations of the two companies could have
a material adverse effect on the business and operating results of New Waste
Management. See "The Merger -- Reasons for the Merger; Recommendations of the
Boards of Directors".
17
<PAGE>
RISKS INHERENT IN THE INDUSTRY OR PARTICULAR TO USA WASTE OR WASTE MANAGEMENT
COMPETITION. The waste management industry is highly competitive and
requires substantial capital resources. The industry consists of several large
national waste management companies, including both USA Waste and Waste
Management, as well as numerous local and regional companies of varying sizes
and financial resources. USA Waste and Waste Management compete 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.
GOVERNMENT REGULATION. Each of USA Waste's and Waste Management's
operations are, and the combined company's operations will 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 the combined company'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 USA Waste and Waste
Management is subject to extensive and evolving environmental and land use laws
and regulations, which have become increasingly stringent. These laws and
regulations affect USA Waste's and Waste Management'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 the combined company
will be successful in obtaining and maintaining in effect permits and approvals
required for the successful operation and growth of its business, including
permits and approvals required for the development of additional disposal
capacity 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 the combined company 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 the combined company 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 USA Waste's, Waste Management's or the
combined company's disposal facilities, particularly WTI's waste-to-energy
facilities.
POTENTIAL ENVIRONMENTAL LIABILITY; INSURANCE. New 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 USA Waste, Waste Management 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
the combined company's results of operations and financial condition.
USA Waste and Waste Management 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, the promulgation of new laws and the
development and discovery of new facts and conditions have required USA Waste
and Waste
18
<PAGE>
Management, and in the future may require the combined company, 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 the combined company
will adequately cover all of such company's remediation and closure/post-closure
costs.
In the ordinary course of their businesses, USA Waste and Waste Management
may become involved in a variety of legal and administrative proceedings
relating to land use and environmental laws and regulations. These may include
proceedings by federal, state, 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 USA Waste or Waste Management 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 USA Waste or Waste Management or alleging
violations of the permits pursuant to which USA Waste or Waste Management
operates or laws or regulations to which USA Waste or Waste Management is
subject; and actions seeking to impose liability on USA Waste or Waste
Management for any environmental impact at their owned or operated facilities
(or at facilities formerly owned or operated by USA Waste or Waste Management or
its predecessors) or damage that those facilities or other properties may have
caused to adjacent landowners or others, including groundwater or soil
contamination. The adverse outcome of one or more of these proceedings could
have a material adverse effect on the combined company's financial position,
results of operations or cash flows. Each of USA Waste and Waste Management has
from time to time received, and expects that the combined company 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 USA
Waste and Waste Management generally seeks to work with the authorities to
resolve the issues raised by such citations or notices. There can be no
assurance, however, that the combined company will always be successful in this
regard, or that such future citations or notices will not have a materially
adverse effect on the combined company's financial position, results of
operations or cash flows.
USA Waste's and Waste Management's insurance for environmental liability is
very limited because USA Waste and Waste Management believe that the cost for
such insurance is high relative to the coverage it would provide. Due to the
limited nature of such insurance coverage for environmental liability, if USA
Waste or Waste Management were to incur liability for environmental damage, such
liability could have a material adverse effect on the combined company'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 USA Waste and Waste Management. 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 the
combined company'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. USA Waste has regularly
pursued opportunities to expand its services though the acquisition of
additional solid waste management businesses and operations that can be
effectively integrated with USA Waste's existing operations. In addition, USA
Waste regularly pursues mergers and acquisition transactions, some of which are
significant, in new markets where USA Waste believes that it can successfully
become a provider of integrated solid waste management services. As one of the
leading industry consolidators, USA Waste could announce other transactions with
either publicly or privately owned businesses at any time. It is expected that
New Waste Management will 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 USA Waste generally has been
successful in implementing its acquisition strategy, there can be no assurance
that attractive acquisition
19
<PAGE>
opportunities will continue to be available to New Waste Management, that New
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 the combined
company's ability to retain or obtain franchises or other business
opportunities.
INTERNATIONAL OPERATIONS AND EXPANSION. A significant portion of USA
Waste's operations are conducted in Canada, and USA Waste intends to continue to
expand its Canadian operations, and a significant portion of Waste Management's
operations are conducted internationally. New 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, social and
economic instability, general strikes, nationalization of assets, currency
restrictions and exchange rate fluctuations, nullification, modification or
renegotiation of contracts, and governmental regulation, all of which are beyond
the control of USA Waste and Waste Management. No prediction can be made as to
how existing or future foreign governmental regulations in any jurisdiction may
affect the combined company in particular or the solid waste management industry
in general.
MATTERS RELATED TO WASTE MANAGEMENT ACCOUNTING PRACTICES. In November and
December 1997, several alleged purchasers of Waste Management securities
(including, but not limited to, Waste Management Common Stock), who allegedly
bought their securities between 1996 and 1997, brought 14 purported class action
lawsuits against Waste Management and several of its current and former officers
in the United States District Court for the Northern District of Illinois. Each
of these lawsuits asserted that the defendants violated the federal securities
laws by issuing allegedly false and misleading statements in 1996 and 1997 about
Waste Management's financial condition and results of operations. Among other
things, the plaintiffs alleged that Waste Management employed accounting
practices that were improper and that caused its publicly filed financial
statements to be materially false and misleading. The lawsuit demanded, among
other relief, unspecified compensatory damages, pre- and post-judgment interest,
attorneys' fees, and the costs of conducting the litigation. In January 1998,
the 14 putative class actions were consolidated before one judge. On May 29,
1998, the plaintiffs filed a consolidated amended complaint against Waste
Management and four of its former officers. The consolidated amended complaint
seeks recovery on behalf of a proposed class of all purchasers of Waste
Management's securities between May 29, 1995 and October 30, 1997. The
consolidated amended complaint alleges, among other things, that Waste
Management filed false and misleading financial statements beginning in 1991 and
continuing through October 1997 and seeks recovery for alleged violations of the
federal securities laws between May 1995 and October 1997. Like the individual
complaints that preceded it, the consolidated amended complaint seeks
unspecified compensatory damages, pre- and post-judgment interest, attorneys'
fees, and the costs of conducting the litigation. It is not possible at this
time to predict the impact this litigation may have on Waste Management and New
Waste Management, although it is reasonably possible that the outcome may have a
material adverse impact on their respective financial condition or results of
operations in one or more future periods. Waste Management intends to defend
itself vigorously in this litigation. Waste Management is aware of another
action arising out of the same set of facts alleging a cause of action under
Illinois state law.
Waste Management is also aware that the Securities and Exchange Commission
(the "Commission") has commenced a formal investigation with respect to Waste
Management's previously filed financial statements (which were subsequently
restated) and related accounting policies, procedures and system of internal
controls. Waste Management intends to cooperate with such investigation. Waste
Management is unable to predict the outcome or impact of this investigation at
this time.
20
<PAGE>
NEED FOR ADDITIONAL FINANCING. New Waste Management is expected to 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 the combined
company's future capital requirements may be provided through future issuances
of debt or equity
securities. There can be no assurance that the combined company 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.
USA Waste has historically used variable rate debt under revolving bank
credit arrangements as one method of financing its rapid growth. Although recent
financings by USA Waste have reduced the amount of variable rate debt currently
outstanding, it is expected that New Waste Management will use variable rate
debt as a financing alternative after the Merger. To the extent that variable
interest rates tend to fluctuate as general interest rates change, an increase
in interest rates could have a material adverse effect on the combined company's
earnings in the future.
CAPITALIZED EXPENDITURES. In accordance with generally accepted accounting
principles, USA Waste and Waste Management capitalize certain expenditures and
advances relating to their acquisitions, pending acquisitions and landfill
development and expansion projects. Indirect acquisition costs, such as
executive salaries, general corporate overhead, public affairs and other
corporate services, are expensed as incurred. USA Waste's and Waste Management's
policy is to charge against earnings any unamortized capitalized expenditures
and advances (net of any portion thereof that USA Waste or Waste Management, 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 the
combined company in future periods will not be required to incur a charge
against earnings in accordance with such policy, which charge, depending upon
the magnitude thereof, could have a material adverse effect on the combined
company's results of operations and financial condition.
SEASONALITY. USA Waste's and Waste Management'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 (a) the volume of waste relating to
construction and demolition activities tends to increase in the spring and
summer months and (b) the volume of residential waste in certain regions where
each company operates tends to decrease during the winter months.
NEW WASTE MANAGEMENT DIVIDENDS. USA Waste has never declared or paid cash
dividends on its common stock, while Waste Management has paid cash dividends on
its common stock since 1976. However, Waste Management recently adopted a new
dividend policy, substantially reducing the amount of its quarterly dividend to
$0.01 per share commencing with the dividend declared in the second quarter of
1998. The decision whether to apply legally available funds to the payment of
dividends on common stock of New Waste Management will be made by the New Waste
Management Board from time to time in the exercise of its business judgment. See
"Market Price and Dividend Information".
THE SPECIAL MEETINGS
THE USA WASTE SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE. This Joint Proxy Statement/Prospectus is
being furnished to holders of USA Waste Common Stock in connection with the
solicitation of proxies by the USA Waste Board for use at the USA Waste Special
Meeting to be held on Wednesday, July 15, 1998, at the Four Seasons Hotel, 1300
Lamar, Houston, Texas, commencing at 3:00 p.m., local time, and at any
adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to stockholders of USA Waste on or about Friday, June 12,
1998.
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PURPOSES OF THE USA WASTE SPECIAL MEETING. At the USA Waste Special
Meeting, stockholders of USA Waste Common Stock will be asked to consider and
vote upon:
- a proposal to amend the USA Waste Charter to (a) increase the number of
authorized shares of USA Waste Common Stock from 500,000,000 shares to
1,500,000,000, thus enabling USA Waste to have a sufficient number of
authorized shares to consummate the Merger and (b) change the name of USA
Waste to "Waste Management, Inc.", in each case as of the Effective Time;
- a proposal to issue up to 380,625,000 shares of USA Waste Common Stock in
exchange for shares of Waste Management Common Stock pursuant to the
Merger Agreement;
- a proposal to approve an amendment to the USA Waste 1993 Stock Plan
increasing the aggregate number of shares of USA Waste Common Stock that
may be issued under such Plan from 16,500,000 to 26,500,000;
- a proposal to approve an amendment to the USA Waste 1996 Stock Plan
increasing the aggregate number of shares of USA Waste Common Stock that
may be issued under such Plan from 400,000 to 1,400,000; and
- such other matters as may properly be brought before the USA Waste Special
Meeting or any adjournment or postponement thereof.
RECOMMENDATIONS OF THE USA WASTE BOARD. The USA Waste Board has unanimously
approved the Merger Agreement, the Charter Proposal, the Share Issuance
Proposal, the 1993 Plan Proposal and the 1996 Plan Proposal and recommends a
vote FOR approval of each such proposal.
STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED. The USA Waste Board has fixed
the close of business on June 9, 1998 as the record date (the "USA Waste Record
Date") for the determination of the USA Waste stockholders entitled to notice of
and to vote at the USA Waste Special Meeting. Accordingly, only holders of
record of USA Waste Common Stock on the USA Waste Record Date will be entitled
to notice of and to vote at the USA Waste Special Meeting. As of the USA Waste
Record Date, there were outstanding and entitled to vote [ ] shares of USA
Waste Common Stock (constituting all of the voting stock of USA Waste), which
shares were held by approximately [ ] holders of record. Each holder of
record of shares of USA Waste Common Stock on the USA Waste Record Date is
entitled to one vote per share, which may be cast either in person or by
properly executed proxy, at the USA Waste Special Meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of USA Waste Common Stock entitled to vote at the USA Waste
Special Meeting is necessary to constitute a quorum at the USA Waste Special
Meeting.
The approval of the Charter Proposal will require the affirmative vote of
the holders of a majority of the shares of USA Waste Common Stock outstanding on
the USA Waste Record Date. The approval of the Share Issuance Proposal will
require the affirmative vote of the holders of shares of USA Waste Common Stock
representing a majority of the votes cast on the proposal. The approval of each
of the 1993 Plan Proposal and the 1996 Plan Proposal will require the
affirmative vote of the holders of a majority of the shares of USA Waste Common
Stock present or represented by proxy and entitled to vote at the USA Waste
Special Meeting.
The approval of the Share Issuance Proposal is required by the rules of the
NYSE governing corporations with securities listed on the NYSE. The approval of
the Charter Proposal and the Share Issuance Proposal is a condition to the
consummation of the Merger.
Shares of USA Waste Common Stock represented in person or by properly
executed proxy will be counted for the purpose of determining whether a quorum
is present at the USA Waste Special Meeting. Shares which abstain from voting as
to a particular matter will be treated as shares that are present and entitled
to vote at the USA Waste Special Meeting for purposes of determining whether a
quorum exists, but will not be counted as votes cast on such matter. If a broker
or nominee holding stock in "street name"
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indicates on a proxy that it does not have discretionary authority to vote as to
a particular matter ("broker non-votes"), those shares will be treated as
present and entitled to vote at the USA Waste Special Meeting for purposes of
determining whether a quorum exists, but will not be counted as votes cast on
such matter. Accordingly, in determining whether the Share Issuance Proposal has
received the requisite number of affirmative votes, abstentions and broker
non-votes will have no effect on the voting on such proposal; in determining
whether the Charter Proposal has received the requisite number of affirmative
votes, abstentions and broker non-votes will have the same effect as a vote
against the Charter Proposal; and in determining whether either the 1993 Plan
Proposal or the 1996 Plan Proposal has received the requisite number of
affirmative votes, abstentions will have the same effect as a vote against such
Proposal and broker non-votes will have no effect on the voting on such
Proposal.
As of May 1, 1998, current directors and executive officers of USA Waste and
their affiliates may be deemed to be beneficial owners of approximately
23,957,817 shares of USA Waste Common Stock, or approximately [ %] of the
shares of USA Waste Common Stock entitled to vote at the USA Waste Special
Meeting. Each of such directors and executive officers of USA Waste has advised
USA Waste that he or she intends to vote or direct the vote of all shares of USA
Waste Common Stock over which he or she has voting control for approval of the
Charter Proposal, the Share Issuance Proposal, the 1993 Plan Proposal and the
1996 Plan Proposal. See "The Companies -- USA Waste -- Stock Ownership of
Management".
PROXIES. This Joint Proxy Statement/Prospectus is being furnished to USA
Waste stockholders in connection with the solicitation of proxies by, and on
behalf of, the USA Waste Board for use at the USA Waste Special Meeting, and is
accompanied by a form of proxy.
All shares of USA Waste Common Stock which are entitled to vote and are
represented at the USA Waste Special Meeting by properly executed proxies
received prior to or at the USA Waste Special Meeting, and not revoked, will be
voted at the USA Waste 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 of the
Charter Proposal, for approval of the Share Issuance Proposal, for approval of
the 1993 Plan Proposal and for approval of the 1996 Plan Proposal.
If any other matters are properly presented at the USA Waste Special Meeting
for consideration, including, among other things, consideration of a motion to
adjourn such 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 form of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their best 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 USA Waste, at or before the taking of the vote at the USA
Waste 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 the Secretary of USA Waste before the taking of the vote at
the USA Waste Special Meeting or (iii) attending the USA Waste Special Meeting
and voting in person (although attendance at the USA Waste Special Meeting will
not in and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent to USA Waste Services, Inc., 1001
Fannin, Suite 4000, Houston, Texas 77002, Attention: Secretary, or hand
delivered to the Secretary of USA Waste at or before the taking of the vote at
the USA Waste Special Meeting.
All expenses of USA Waste's solicitation of proxies will be borne by USA
Waste, and the cost of preparing and mailing this Joint Proxy
Statement/Prospectus to USA Waste stockholders and to Waste Management
stockholders will be paid one-half by USA Waste and one-half by Waste
Management. In addition to solicitation by use of the mails, proxies may be
solicited from USA Waste stockholders by directors, officers and employees of
USA Waste 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. USA Waste has retained Corporate Investor Communications, a proxy
solicitation firm, for assistance in connection with
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the solicitation of proxies for the USA Waste 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 USA Waste will reimburse such brokerage houses, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
therewith.
THE WASTE MANAGEMENT SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE. This Joint Proxy Statement/Prospectus is
being furnished to holders of Waste Management Common Stock in connection with
the solicitation of proxies by the Waste Management Board for use at the Waste
Management Special Meeting to be held on Wednesday, July 15, 1998, at the
offices of Harris Trust and Savings Bank, 111 West Monroe Street, Chicago,
Illinois, commencing at 2:00 p.m., local time, and at any adjournment or
postponement thereof.
This Joint Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to stockholders of Waste Management on or about Friday, June
12, 1998.
PURPOSES OF THE WASTE MANAGEMENT SPECIAL MEETING. At the Waste Management
Special Meeting, holders of Waste Management Common Stock will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement and
such other matters as may properly be brought before the Waste Management
Special Meeting or any adjournment or postponement thereof.
RECOMMENDATION OF THE WASTE MANAGEMENT BOARD. The Waste Management Board
has unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Merger, and recommends that holders of Waste Management
Common Stock vote FOR approval and adoption of the Merger Agreement.
STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED. The Waste Management Board
has fixed the close of business on June 9, 1998 as the record date for the
determination of the holders of Waste Management Common Stock entitled to notice
of and to vote at the Waste Management Special Meeting (the "Waste Management
Record Date"). Accordingly, only holders of record of Waste Management Common
Stock on the Waste Management Record Date will be entitled to notice of, and to
vote at, the Waste Management Special Meeting. As of the Waste Management Record
Date, there were outstanding and entitled to vote [ ] shares of Waste
Management Common Stock (constituting all of the voting stock of Waste
Management), which shares were held by approximately [ ] holders of record.
Each holder of record of shares of Waste Management Common Stock on the Waste
Management Record Date is entitled to one vote per share, which may be cast
either in person or by properly executed proxy, at the Waste Management Special
Meeting. The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of Waste Management Common Stock
entitled to vote at the Waste Management Special Meeting is necessary to
constitute a quorum at the Waste Management Special Meeting.
The approval and adoption of the Merger Agreement will require the
affirmative vote of the holders of a majority of the shares of Waste Management
Common Stock outstanding on the Waste Management Record Date.
Shares of Waste Management Common Stock represented in person or by proxy
will be counted for the purpose of determining whether a quorum is present at
the Waste Management 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 Waste
Management 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 Waste Management 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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As of May 1, 1998, current directors and executive officers of Waste
Management and their affiliates may be deemed to be beneficial owners of
approximately 1,104,339 shares of Waste Management Common Stock, representing
less than 1% of the shares of Waste Management Common Stock entitled to vote at
the Waste Management Special Meeting. Each of such directors and executive
officers of Waste Management has advised Waste Management that he or she intends
to vote or direct the vote of all shares of Waste Management Common Stock over
which he or she has or shares voting control for approval and adoption of the
Merger Agreement. See "The Companies -- Waste Management -- Stock Ownership of
Management."
PROXIES. This Joint Proxy Statement/Prospectus is being furnished to Waste
Management stockholders in connection with the solicitation of proxies by, and
on behalf of, the Waste Management Board for use at the Waste Management Special
Meeting, and is accompanied by a form of proxy.
All shares of Waste Management Common Stock which are entitled to vote and
are represented at the Waste Management Special Meeting by properly executed
proxies received prior to or at the Waste Management 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 Waste Management 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 Waste Management, at or before the taking of the vote at
the Waste Management 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 Waste Management before the taking of the
vote at the Waste Management Special Meeting or (iii) attending the Waste
Management Special Meeting and voting in person (although attendance at the
Waste Management 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 Waste Management, Inc., 3003 Butterfield Road, Oak Brook,
Illinois 60523, Attention: Secretary, or hand delivered to the Secretary of
Waste Management at or before the taking of the vote at the Waste Management
Special Meeting.
All expenses of Waste Management's solicitation of proxies will be borne by
Waste Management, and the cost of preparing and mailing this Joint Proxy
Statement/Prospectus to Waste Management stockholders and to USA Waste
stockholders will be paid one-half by Waste Management and one-half by USA
Waste. In addition to solicitation by use of the mails, proxies may be solicited
from Waste Management stockholders by directors, officers and employees of Waste
Management 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. Waste Management has retained Morrow & Co., a proxy solicitation
firm, for assistance in connection with the solicitation of proxies for the
Waste Management Special Meeting at a cost of approximately $8,000, 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 Waste
Management will reimburse such brokerage houses, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection therewith.
WASTE MANAGEMENT STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
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THE MERGER
BACKGROUND OF THE MERGER
On October 29, 1997, John E. Drury, Chairman and Chief Executive Officer of
USA Waste, Rodney R. Proto, President and Chief Operating Officer of USA Waste,
and Earl E. DeFrates, Executive Vice President and Chief Financial Officer of
USA Waste, had preliminary discussions with certain of USA Waste's financial
advisors concerning the possibility of pursuing a potential business combination
between USA Waste and Waste Management.
Also on October 29, 1997, Robert S. Miller, a director of Waste Management,
was named Chairman of the Board and Acting Chief Executive Officer of Waste
Management following the unexpected voluntary resignation of Ronald T. LeMay
earlier that day.
On October 30, 1997, Messrs. Drury, Proto, DeFrates and Gregory T. Sangalis,
Vice President and General Counsel of USA Waste, met to discuss the advisability
of pursuing a business combination transaction with Waste Management. Also on
October 30, 1997, Jerome B. York, a director of USA Waste, at the request of USA
Waste management, contacted Mr. Miller and suggested that Mr. Miller, as the
newly named Chairman of the Board and Acting Chief Executive Officer of Waste
Management, be introduced to members of the senior management of USA Waste to
discuss the waste management industry generally. On October 31, 1997, Mr. Proto
spoke with Mr. Miller and scheduled such a meeting for November 2, 1997. On
November 2, 1997, Messrs. Drury, Proto and Miller met in Houston, Texas and
discussed USA Waste's operating history and financial performance, its
management structure, as well as the management philosophies and industry
backgrounds of USA Waste's senior management.
On November 3, 1997, the USA Waste Board held a telephonic meeting at which
it discussed, among other things, recent senior management resignations at Waste
Management and the decline in market price of Waste Management Common Stock
following the announcement of such resignations. At this meeting, the USA Waste
Board authorized, for investment purposes, USA Waste's participation in LJ Water
Partners, L.P. (the "Limited Partnership"), a limited partnership formed for the
purpose of acquiring shares of Waste Management Common Stock.
During the week of November 24, 1997, Mr. Drury contacted Mr. Miller to
schedule a meeting and, on November 30, 1997, Messrs. Drury, Proto and Miller
again met, and discussed the possibility of effecting a strategic business
combination between USA Waste and Waste Management which would create value for
each company's stockholders. USA Waste indicated it would be interested in
effecting such a transaction using an exchange ratio (the number of shares of
USA Waste Common Stock to be issued in the business combination in exchange for
each share of Waste Management Common Stock) that would have reflected the
relative market prices of USA Waste Common Stock and Waste Management Common
Stock, rather than a premium for either company's stockholders. Messrs. Drury,
Proto and Miller also discussed, on a preliminary basis, certain significant
terms of a potential business combination including, among other things, the
desired accounting and tax treatment of any such combination, the structure and
composition of the combined company's board of directors and certain senior
management roles. At a regularly scheduled meeting held on December 2, 1997, the
USA Waste Board was provided with a brief summary of the matters discussed at
the November 30th meeting.
On December 3, 1997, Mr. Drury sent a letter to Mr. Miller reemphasizing the
salient points discussed at their November 30th meeting in favor of further
exploring a business combination between the two companies on a market-to-market
basis. Attached to this letter was an analysis of certain aspects of the
proposed transaction prepared by DLJ. On December 5, 1997, Waste Management
asked Merrill Lynch to review the materials prepared by DLJ and prepare a
presentation for the Waste Management Board in executive session following a
Waste Management Board meeting scheduled for December 8, 1997. During the first
week of December, including pursuant to a letter dated December 5, 1997, Mr.
Drury communicated with Mr. Miller to clarify and elaborate on issues raised
initially in their November 30th meeting with respect to the proposed terms of a
business combination between USA Waste and Waste Management,
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synergies realized in recent industry transactions, as well as preliminary
estimates of the synergies to be realized from a strategic business combination
between USA Waste and Waste Management.
On December 8, 1997, the Waste Management Board met in executive session,
with representatives of Merrill Lynch in attendance, to consider strategic
alternatives available to Waste Management, including investigating further the
business combination discussed among Messrs. Miller, Drury and Proto on November
30th, investigating further other potential business combinations with third
parties, continuing the Waste Management Board's efforts to recruit a new Chief
Executive Officer of Waste Management and continuing as an independent company.
The Waste Management Board decided that the best strategy for creating long-term
stockholder value was to continue its search for a new Chief Executive Officer,
and determined that it was not interested in pursuing a business combination of
the type proposed by USA Waste. Mr. Miller contacted Mr. Drury and informed him
of the decision of the Waste Management Board.
On December 16, 1997, Mr. Miller met with two representatives of the Limited
Partnership which was, at that time, a stockholder of Waste Management, who
encouraged Mr. Miller to investigate further a potential business combination
with USA Waste on the terms discussed at the November 30th meeting among Messrs.
Miller, Drury and Proto. USA Waste owned a 49% interest in the Limited
Partnership and the general partner of the Limited Partnership, Relational
Investors, LLC ("Relational Investors"), also acts as a financial advisor to USA
Waste in connection with the Merger. Within a week of this meeting, Mr. Miller
spoke again with these representatives and informed them that the Waste
Management Board was continuing in its search for a new Chief Executive Officer
and was not interested in pursuing a business combination of the type proposed
by USA Waste.
On December 30, 1997, Mr. Drury sent to Mr. Miller letters addressed
individually to the members of the Waste Management Board in which he proposed a
business combination between USA Waste and Waste Management using an exchange
ratio that would reflect a premium to market price for Waste Management
stockholders and requested a meeting with the Waste Management Board. Messrs.
Drury and Miller exchanged telephone messages on December 31st but did not speak
to each other on that day. Herbert A. Getz, Senior Vice President, General
Counsel and Secretary of Waste Management, distributed these letters to the
members of the Waste Management Board on December 31, 1997.
On January 5, 1998, Messrs. Drury, Proto, DeFrates and Sangalis met to
discuss the status of the discussions with Waste Management. During the week of
January 5, 1998, Mr. Drury was informed through financial advisors to Waste
Management that Waste Management was continuing in its search for a new Chief
Executive Officer. However, after discussions with members of the Waste
Management Board, Mr. Miller contacted Mr. Drury later during the week of
January 5, 1998 and arranged for Messrs. Drury, Proto and DeFrates to meet with
selected members of the Waste Management Board on January 10, 1998. In a letter
dated January 8, 1998, Mr. Miller indicated to Mr. Drury that the Waste
Management Board was primarily interested in understanding the management
philosophies and qualifications of USA Waste's senior management. On January 10,
1998, Messrs. Drury, Proto, DeFrates, York and Miller met with Paul M. Montrone,
Peer Pedersen, James R. Peterson, John C. Pope and Steven G. Rothmeier,
directors of Waste Management, and discussed certain terms of the proposed
business combination between USA Waste and Waste Management, as well as the
experience and qualifications of USA Waste's senior management. On January 13,
1998, the Waste Management Board held a special meeting and discussed, among
other things, the results of the January 10, 1998 meeting.
Also on January 13, 1998, Messrs. Miller and Drury met to further discuss
certain significant terms of a business combination between the two companies
including, among other things, certain corporate governance matters, as well as
to determine how to further their discussions regarding such a business
combination, including the advisability of entering into a confidentiality and
standstill agreement.
On January 20-21, 1998, senior executive officers of Waste Management and
USA Waste met and discussed significant aspects of a possible business
combination, including the potential synergies to be
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realized from such a transaction, antitrust and other regulatory approvals that
would be required to effect such a transaction, and the qualifications and
backgrounds of members of senior management of each company. The parties agreed
that they would negotiate and enter into a confidentiality agreement in order to
facilitate further discussions. Dr. Pastora San Juan Cafferty, a director of
Waste Management and a member of the Waste Management Board committee leading
its search for a new Chief Executive Officer, also met with Messrs. Miller,
Drury and Proto and discussed, among other things, USA Waste's senior
management's experience in the waste management industry. On January 26, 1998,
Waste Management and USA Waste executed a confidentiality agreement, which
included a customary one-year standstill provision.
On the evening of January 28 and on January 29, 1998, the Waste Management
Board met and discussed, among other things, the possible merger of the two
companies. On February 4-5, 1998, Joseph M. Holsten, Executive Vice President
and Chief Operating Officer of Waste Management, and William P. Hulligan, a
recently retired Executive Vice President of WMNA, met with USA Waste
representatives (together with legal counsel) in Houston, Texas to discuss
potential synergies resulting from a business combination, antitrust regulatory
approval matters and certain other operational issues.
In late January, Mr. Miller advised Mr. Drury that any further discussions
between the two companies regarding the financial terms of a potential business
combination transaction should be deferred until after Waste Management
announced its 1997 financial results, together with anticipated restated results
of operations for the period from 1992 through 1996, which it expected to do in
mid- to late-February 1998. On several occasions during the month of February,
Messrs. Drury and Miller continued their previous discussions regarding the
structure and composition of the combined company's board of directors and
certain senior management roles, the potential synergies to be realized from a
business combination transaction and the antitrust and other regulatory
approvals that would be required to effect such a transaction. On February 24,
1998, Waste Management announced its financial results for the year ended
December 31, 1997, as well as restated financial results from 1992 through 1996.
On February 26 and 27, 1998, the senior managements of Waste Management and
USA Waste, together with financial and legal advisors to both companies, met
again to discuss the proposed transaction. During this period and on the morning
of February 28, 1998, several directors of Waste Management also met privately
with Mr. Miller and the senior management of USA Waste to become acquainted with
them and to discuss the merits of a proposed business combination. During the
afternoon of February 28, 1998, Waste Management and USA Waste reached a
tentative agreement that any such transaction should be effected at an exchange
ratio of 0.725 of a share of USA Waste Common Stock per share of Waste
Management Common Stock, which ratio reflected an approximately 21% premium to
Waste Management stockholders (based on the last reported sale prices per share
of USA Waste Common Stock and Waste Management Common Stock on the NYSE
Composite Transaction Tape on February 27, 1998), that the board of directors of
the combined company should consist of an equal number of representatives of
each company, and that certain senior management positions of the combined
company should be filled by members of USA Waste's senior management, subject to
a number of conditions, including satisfactory completion of due diligence and
the negotiation of a mutually acceptable definitive agreement.
From March 1, 1998 through the signing of the Merger Agreement on March 10,
1998, representatives of Waste Management and USA Waste and their respective
legal and financial advisors met daily (whether in person or telephonically) to
discuss the terms of the Merger Agreement and related documents, as well as
accounting and other transaction issues, and conducted financial, legal and
accounting "due diligence" investigations of the respective companies.
At meetings of the USA Waste Board held on March 8, 9 and 10, 1998, the USA
Waste Board met and discussed extensively with Messrs. Drury, Proto, DeFrates
and Sangalis, as well as USA Waste's outside legal and financial advisors, the
status of the discussions with Waste Management, the proposed terms of the
Merger Agreement, USA Waste's legal, financial, environmental and accounting
"due diligence" investigations of Waste Management, the regulatory approvals
that would be required to consummate the
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Merger and the potential effects of the Merger on USA Waste and the combined
company. At the USA Waste Board meeting on March 10, DLJ delivered its oral
opinion to the USA Waste Board, subsequently confirmed in writing (the "DLJ
Opinion"), that, as of such date, and based upon and subject to the assumptions
made, matters considered and limitations on the review undertaken set forth in
the DLJ Opinion, the Exchange Ratio was fair to USA Waste from a financial point
of view. At such meeting, the USA Waste Board unanimously approved the Merger
Agreement and the transactions contemplated thereby, including the proposed
amendments to the USA Waste Charter and the issuance of shares of USA Waste
Common Stock in the Merger, and unanimously recommended that the holders of USA
Waste Common Stock vote to approve the Charter Proposal and the Share Issuance
Proposal.
The Waste Management Board met informally on the evening of March 9, 1998
and formally on March 10, 1998 and discussed with the senior management of Waste
Management and financial, accounting and legal advisors the status of the merger
discussions with USA Waste, as well as the proposed terms of the Merger and the
effects of the Merger on Waste Management and the combined company. Waste
Management's senior management and advisors made presentations concerning the
Merger, Waste Management's legal, financial, environmental and accounting "due
diligence" investigation of USA Waste, potential regulatory approvals required
to effect the Merger and potential operational and administrative synergies
resulting from the Merger. Merrill Lynch delivered its written opinion that, as
of such date and subject to the factors and assumptions set forth therein, the
Exchange Ratio was fair to holders of Waste Management Common Stock, other than
USA Waste and its affiliates, from a financial point of view. At such meeting,
the Waste Management Board unanimously approved the Merger Agreement and the
transactions contemplated thereby, including the Merger, and unanimously
recommended that the holders of Waste Management Common Stock vote in favor of
approval and adoption of the Merger Agreement and the Merger.
During the evening of March 10, 1998, following the approval of the Merger
Agreement and related matters by the USA Waste Board and the Waste Management
Board, USA Waste and Waste Management finalized, executed and delivered the
Merger Agreement and related documents. A joint public announcement of the
Merger was made by USA Waste and Waste Management on the morning of March 11,
1998.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The USA Waste Board has unanimously determined that the Merger is in the
best interests of USA Waste and its stockholders, has unanimously approved the
Merger Agreement, the Charter Proposal and Share Issuance Proposal and
unanimously recommends that the stockholders of USA Waste vote FOR approval of
the Charter Proposal and Share Issuance Proposal for the reasons set forth
below.
The Waste Management Board has unanimously determined that the Merger is in
the best interests of Waste Management and its stockholders, has unanimously
approved the Merger Agreement and the transactions contemplated thereby,
including the Merger, and unanimously recommends that the stockholders of Waste
Management vote FOR approval and adoption of the Merger Agreement for the
reasons set forth below.
JOINT REASONS FOR THE MERGER
The USA Waste Board and the Waste Management Board believe that the Merger
represents a unique strategic opportunity for two companies with similar
business operations and complementary geographical presence, and believe that
the combined company will have an experienced and talented senior management
team as well as some of the highest quality assets in the waste management
industry. Both boards of directors believe that New Waste Management will have
greater financial strength, operational efficiencies, earning power and growth
potential than either USA Waste or Waste Management would have on its own. The
USA Waste Board and the Waste Management Board identified a number of potential
benefits of the Merger which they believe will contribute to the success of the
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combined company and thus inure to the benefit of stockholders of both
companies, including the following:
- SYNERGIES OF THE COMBINED COMPANY. Each Board of Directors believes that
the Merger should result in a number of important synergies, including the
opportunity to leverage certain financial and administrative functions
over a larger operational and revenue base. In evaluating the Merger, each
Board of Directors also considered the desirability of other potential
savings from the synergies between USA Waste and Waste Management and the
integration of the companies' operations, including administrative cost
savings through elimination of duplicative positions, the realization of
geographic and other efficiencies resulting from access to more landfills,
decreased travel time to such landfills and increased internalization of
collected waste and the ability to reduce the capital expenditures of the
combined company relative to the capital expenditure budgets for the two
companies. The managements of USA Waste and Waste Management estimated
that annualized synergies and cost savings of approximately $800 million
pre-tax would be realized from the Merger.
- GEOGRAPHICALLY COMPLEMENTARY NORTH AMERICAN OPERATIONS. USA Waste and
Waste Management are engaged in the solid waste management business
throughout North America and provide solid waste management services,
consisting of solid waste collection, transfer, disposal and recycling
services to municipal, commercial, industrial and residential customers.
USA Waste and Waste Management together have collection operations,
transfer facilities, landfills and waste-to-energy facilities which are
highly complementary. Both Boards of Directors also considered the
strategic fit between the markets served by USA Waste and those served by
Waste Management and believe that a combination of USA Waste and Waste
Management will result in the potential for accelerated growth and further
operational efficiencies by allowing the combined company to expand,
complete and link existing service areas.
- SIGNIFICANT NEW GROWTH OPPORTUNITIES. USA Waste's strategy has been to
expand its solid waste management services aggressively by acquiring
additional solid waste collection operations, landfills and transfer
stations. The Boards of Directors of USA Waste and Waste Management
believe that the combined company will be better positioned than either
company would be on its own to pursue consolidation opportunities by being
able to draw upon the resources, experience and development efforts of
both USA Waste and Waste Management.
- COMBINATION OF BEST OF BOTH COMPANIES. The combined company will be able
to take advantage of the best personnel and the best operating systems and
practices currently employed by USA Waste and Waste Management. For
example, the management team of New Waste Management will include highly
skilled executive officers and field managers of both USA Waste and Waste
Management.
USA WASTE'S ADDITIONAL REASONS FOR THE MERGER AND OTHER CONSIDERATIONS
In reaching its conclusion to approve the Merger Agreement, the Charter
Proposal and the Share Issuance Proposal the USA Waste Board consulted with
management of USA Waste, as well as with its financial, accounting and legal
advisors, and considered the factors described above under "-- Joint Reasons for
the Merger" and a number of additional factors, including the following:
- the current economic, financial and business environment generally and the
present and anticipated environment in the waste management industry in
particular, including the strategic options available to and the effects
on USA Waste of potential further consolidation within the industry;
- the judgment, advice and analysis of USA Waste's management with respect
to the strategic, financial and operational benefits of the Merger, based
in part on the business, financial, accounting and legal due diligence
investigations performed with respect to Waste Management, as well as the
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USA Waste Board's own knowledge of USA Waste, Waste Management and their
respective businesses;
- the effectiveness of the Merger in implementing and accelerating USA
Waste's basic long-term growth strategy compared to USA Waste continuing
as a stand-alone entity;
- the financial condition, results of operations, businesses and prospects
of USA Waste and Waste Management, including, but not limited to,
information with respect to their respective recent and historic stock
prices and earnings performance, and the accretive nature of the Merger to
the earnings per share of USA Waste stockholders;
- the financial analyses presented by DLJ, using the pro forma financial
information provided by the respective managements of USA Waste and Waste
Management, and the oral opinion of DLJ, subsequently confirmed in the
written DLJ Opinion, that, as of March 10, 1998, and based upon and
subject to the assumptions made, matters considered and limitations on the
review undertaken set forth in the DLJ Opinion, the Exchange Ratio was
fair to USA Waste from a financial point of view; see "The Merger --
Opinions of Financial Advisors -- USA Waste";
- the number of shares of USA Waste Common Stock to be issued to
stockholders of Waste Management in the Merger, the percentage ownership
of New Waste Management represented thereby and the fact that, based on
the trading prices for USA Waste Common Stock and Waste Management Common
Stock immediately prior to the announcement of the Merger, the Waste
Management stockholders would receive a premium over the then current
market price of Waste Management Common Stock;
- the express terms and conditions of the Merger Agreement, which were
viewed as providing an equitable basis for the Merger from the standpoint
of USA Waste;
- the proposed corporate governance arrangements with respect to the Board
of Directors and management of the combined company following the Merger;
see "The Merger -- Directors and Executive Officers of the Combined
Company Following the Merger";
- 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 USA Waste and Waste Management to
divest certain of their respective operations; see "The Merger --
Regulatory Approvals";
- the advice of USA Waste's independent accountants with respect to the
ability to account for the Merger as a pooling of interests; see "The
Merger -- Accounting Treatment";
- the advice of USA Waste's counsel that the Merger should be treated as a
tax-free reorganization; see "The Merger -- Certain Federal Income Tax
Consequences";
- the effect of the Merger on USA Waste's other constituencies, including
its senior management and other employees, customers and the communities
served by USA Waste; see "The Merger -- Interests of Certain Persons in
the Merger -- USA Waste";
- the opportunity presented by a combination with Waste Management to expand
its business beyond its current geographic presence in North America;
- the implications of adding the Waste Management business of hazardous
waste management services to USA Waste's traditional solid waste
management business;
- the employment, severance and other arrangements between Waste Management
and certain of its officers, directors and employees; see "The Merger --
Interests of Certain Persons in the Merger -- Waste Management";
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- the difficulty and management distraction inherent in integrating two
large and geographically dispersed operations and the risk that the
synergies and benefits sought in the Merger would not be fully achieved;
- the risk that the Merger would not be consummated, and the effect of the
public announcement of the Merger on the market price of USA Waste Common
Stock;
- the adequacy of recent accounting charges taken and liability reserves
established by Waste Management;
- the risk that pending litigation relating to recent accounting charges
taken by Waste Management would have a material effect on Waste Management
or the combined company;
- the risk that Waste Management might be held responsible for significant
environmental remediation liabilities for closure and post-closure of
disposal facilities it owns or operates;
- the termination fee to be paid by USA Waste to Waste Management ($183
million) in the event of certain terminations of the Merger Agreement; and
- the significant charges expected to be incurred by New Waste Management in
connection with the Merger. Such charges are expected to include, but not
be limited to, any provision related to the settlement of the purported
class action lawsuit and the Commission's investigation with respect to
Waste Management's previously filed financial statements and related
accounting practices, the recognition of an expense related to the rights
of certain Waste Management option holders to sell their options to New
Waste Management for a one-year period following the occurrence of a
"change of control", such as the Merger, and other costs directly related
to the Merger.
The foregoing discussion of the information and factors considered by the
USA Waste Board is not intended to be exhaustive but is believed to include all
material factors considered by the USA Waste Board. In view of the wide variety
of information and factors considered, the USA Waste Board did not find it
practical to, and did not, assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights to
different factors.
WASTE MANAGEMENT'S ADDITIONAL REASONS FOR THE MERGER AND OTHER
CONSIDERATIONS
In reaching its conclusion to approve the Merger Agreement, the Waste
Management Board consulted with management of Waste Management, as well as with
its financial, accounting and legal advisors, and considered the factors
described above under "-- Joint Reasons for the Merger" and a number of
additional factors, including the following:
- the financial performance and condition, businesses and prospects of USA
Waste and Waste Management, including, but not limited to, information
with respect to their respective recent and historic stock prices and
earnings performance, and the accretive nature of the Merger to the
earnings per share of the Waste Management stockholders;
- the effectiveness of the Merger in implementing and accelerating Waste
Management's basic long-term growth strategy, including the refocusing of
Waste Management on the provision of waste management services;
- the detailed financial analyses, pro forma and other information with
respect to USA Waste and Waste Management presented by Merrill Lynch, as
well as the Waste Management Board's own knowledge of USA Waste, Waste
Management and their respective businesses;
- the written opinion of Merrill Lynch that, as of March 10, 1998, and based
upon and subject to the assumptions made, matters considered and
limitations on the review undertaken set forth therein, the Exchange Ratio
was fair from a financial point of view to holders of Waste Management
Common Stock (other than USA Waste and its affiliates); see "The Merger --
Opinions of Financial Advisors -- Waste Management";
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- the terms of the Merger Agreement, which are generally reciprocal in
nature, and certain other information regarding the Merger, including the
terms and structure of the Merger;
- that the Chairman of the Waste Management Board will remain as
non-executive Chairman of the New Waste Management Board for a period of
one year following the consummation of the Merger and Waste Management
will maintain equal board representation in New Waste Management; see "The
Merger -- Directors and Executive Officers of the Combined Company
Following the Merger";
- the substantial solid waste disposal industry experience of the senior
management team of USA Waste (the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer) and their assumptions of the senior
management positions of New Waste Management;
- the fulfillment of Waste Management's goal to find a highly qualified
permanent Chief Executive Officer;
- that Waste Management stockholders will own approximately 60% of New Waste
Management;
- the effect on Waste Management stockholders of Waste Management continuing
as a stand-alone entity compared to the effect of Waste Management
combining with USA Waste, in light of the factors summarized above with
respect to the financial condition and prospects of the two companies on a
stand-alone basis and of the combined company, and the current economic,
financial and business environment;
- 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 USA Waste and Waste Management to
divest certain of their respective operations; see "The Merger --
Regulatory Approvals";
- the advice of Waste Management's independent auditors with respect to the
ability to account for the Merger as a pooling of interests; see "The
Merger -- Accounting Treatment";
- the advice of Waste Management's counsel that the Merger should be treated
as a tax-free reorganization; see "The Merger -- Certain Federal Income
Tax Consequences";
- the effect of the Merger on Waste Management's other constituencies,
including its senior management and other employees, customers and the
communities served by Waste Management; see "The Merger -- Interests of
Certain Persons in the Merger";
- the difficulty and management distraction inherent in integrating two
large and geographically dispersed operations and the risk that the
synergies and benefits sought in the Merger would not be fully achieved;
- the risk that the Merger would not be consummated;
- the substantial charges expected to be incurred by New Waste Management in
connection with the Merger; and
- the termination fee to be paid by Waste Management to USA Waste ($275
million) in the event of certain terminations of the Merger Agreement.
The foregoing discussion of the information and factors considered by the
Waste Management Board is not intended to be exhaustive but is believed to
include all material factors considered by the Waste Management Board. In view
of the wide variety of information and factors considered, the Waste Management
Board did not find it practical to, and did not, assign any relative or specific
weights to the foregoing factors, and individual directors may have given
differing weights to different factors.
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OPINIONS OF FINANCIAL ADVISORS
USA WASTE
OPINION OF FINANCIAL ADVISOR. USA Waste asked DLJ, in its role as financial
advisor to USA Waste, to render an opinion to the USA Waste Board as to the
fairness to USA Waste, from a financial point of view, of the Exchange Ratio,
pursuant to the terms of the Merger Agreement. On March 10, 1998, DLJ delivered
to the USA Waste Board its oral opinion to the effect that, as of such date, the
Exchange Ratio was fair to USA Waste from a financial point of view. This
opinion was subsequently confirmed in the written DLJ Opinion that, as of March
10, 1998, and based on and subject to the assumptions, limitations and
qualifications set forth in such opinion, the Exchange Ratio was fair to USA
Waste from a financial point of view.
THE FULL TEXT OF THE DLJ OPINION IS ATTACHED HERETO AS ANNEX B. THE SUMMARY
OF THE DLJ OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE DLJ OPINION. USA
WASTE STOCKHOLDERS ARE URGED TO READ THE DLJ OPINION CAREFULLY AND IN ITS
ENTIRETY FOR THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED
AND LIMITS OF THE REVIEW BY DLJ IN CONNECTION WITH SUCH OPINION.
The DLJ Opinion was prepared for the USA Waste Board and was directed only
to the fairness from a financial point of view, as of the date thereof, of the
Exchange Ratio to USA Waste. DLJ expressed no opinion in the DLJ Opinion as to
the prices at which USA Waste Common Stock would actually trade at any time. The
DLJ Opinion does not address the relative merits of the Merger and the other
business strategies considered by the USA Waste Board nor does it address the
USA Waste Board's decision to proceed with the Merger. The DLJ Opinion does not
constitute a recommendation to any USA Waste stockholder as to how such
stockholder should vote on the Merger.
USA Waste selected DLJ as its financial advisor because it is an
internationally recognized investment banking firm that has substantial
experience in the solid waste industry and is familiar with USA Waste and its
businesses. DLJ was not retained as an advisor or agent to the stockholders of
USA Waste or any other person. As part of its investment banking business, DLJ
is regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. USA Waste did not impose any restrictions or limitations upon DLJ with
respect to the investigations made or the procedures followed by DLJ in
rendering the DLJ Opinion.
In arriving at the DLJ Opinion, DLJ reviewed the Merger Agreement as well as
financial and other information that was publicly available or furnished to DLJ
by USA Waste and Waste Management, including information provided during
discussions with their respective managements. Included in the information
provided during such discussions were certain financial projections of USA Waste
prepared by the management of USA Waste and certain financial projections of
Waste Management prepared by the management of Waste Management. In addition,
DLJ compared certain financial and securities data of USA Waste and Waste
Management with publicly available information concerning various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of USA Waste Common Stock and Waste Management
Common Stock, reviewed prices and premiums paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of rendering the DLJ
Opinion.
In rendering the DLJ Opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, that was provided to it by USA Waste, Waste
Management, their respective representatives, or that was otherwise reviewed by
DLJ. In particular, DLJ relied upon the estimates of the managements of USA
Waste and Waste
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Management as to the amount and timing of certain operating synergies (the
"Synergies") estimated by the respective managements to be achievable as a
result of the Merger and upon DLJ's discussions of such Synergies and the timing
thereof with the managements of USA Waste and Waste Management. With respect to
the financial projections supplied to DLJ, DLJ assumed that they were reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the managements of USA Waste and Waste Management as to the future
operating and financial performance of USA Waste and Waste Management. DLJ
assumed that no requisite regulatory consent or approval for the Merger will
impose any condition, including any divestiture requirement, that will have a
material adverse effect on the contemplated benefits of the Merger. DLJ did not
assume responsibility for making any independent evaluation of the assets or
liabilities of USA Waste or Waste Management, or for making any independent
verification of the information reviewed by DLJ. DLJ also did not perform any
procedures or analyses regarding potential environmental liabilities of either
USA Waste or Waste Management, nor did DLJ consider the impact of changes in the
regulatory environment in which USA Waste and Waste Management operate. DLJ
further assumed that the Merger will be accounted for as a pooling of interests
under U.S. generally accepted accounting principles ("U.S. GAAP"). DLJ also
assumed that the acquisition by Waste Management of the then-outstanding
minority interest in WTI would be completed prior to the consummation of the
Merger. DLJ relied as to all other legal matters, including that the Merger will
be free of federal tax to USA Waste, Waste Management and holders of USA Waste
Common Stock and as to a reasonable estimate of the costs of resolving certain
pending litigation of Waste Management, on advice of USA Waste's counsel.
The DLJ Opinion was necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. The DLJ Opinion states that, although
subsequent developments may affect the DLJ Opinion, DLJ does not have any
obligation to update, revise or reaffirm its opinion.
The following is a summary of the presentation made by DLJ to the USA Waste
Board at its March 10, 1998 meeting in connection with rendering the DLJ
Opinion. Unless otherwise specified, references to Synergies below assume $200
million of annual synergies realized in 1998 (based on an estimated closing date
of the Merger of October 1, 1998) and $832 million, $865 million, $900 million
and $936 million of synergies realized in 1999, 2000, 2001 and 2002,
respectively. In addition, unless otherwise specified, the analyses set forth
below assume the issuance of approximately 20 million shares of Waste Management
Common Stock prior to the Merger.
EARNINGS PER SHARE IMPACT ANALYSIS. Using the projected earnings of USA
Waste for the years 1998 though 2000 and the projected earnings of Waste
Management for the same years, DLJ compared the projected earnings per share
("EPS") of USA Waste on a stand-alone basis (assuming the Merger does not occur)
to the projected pro forma EPS of the combined entity with Synergies. The
accretive (dilutive) effect of the Merger on EPS to holders of USA Waste Common
Stock was an estimated (15.4%), 10.9% and 10.3% in 1998, 1999 and 2000,
respectively. Assuming $800 million of Synergies in 1998, the accretive effect
of the Merger on EPS to holders of USA Waste Common Stock was an estimated 12.0%
in 1998.
SOLID WASTE PUBLICLY TRADED COMPANY ANALYSIS. DLJ analyzed selected
historical and projected operating information, stock market data and financial
ratios for certain publicly traded solid waste companies. The solid waste
companies (collectively, the "Solid Waste Companies") were divided into three
categories based on capitalization and historical and projected growth. The
first group, categorized as large capitalization/moderate growth ("Group One"),
included Browning-Ferris Industries, Inc. and Waste Management. The second
group, categorized as large capitalization/high growth ("Group Two"), consisted
of USA Waste and Allied Waste Industries, Inc. The third group, categorized as
small capitalization/high growth ("Group Three"), included American Disposal
Services, Inc., Casella Waste Systems, Inc., Eastern Environmental Services,
Inc., Superior Services, Inc. and Waste Industries, Inc. DLJ analyzed the equity
value of each of the Solid Waste Companies (using the stock prices as of March
6, 1998), measured as a multiple of selected financial data, and the enterprise
value of each of the Solid Waste Companies (with
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enterprise value defined as equity value plus total debt plus the liquidation
value of the preferred stock, if any, plus the value of minority interests, if
any, minus cash and short-term investments), measured as a multiple of selected
financial data. In examining these Solid Waste Companies, DLJ analyzed the
equity value of the companies in Group One, Group Two and Group Three to each
company's respective book value, latest twelve month ("LTM") EPS, projected 1998
EPS and projected 1999 EPS. DLJ also analyzed the enterprise value of the
companies in Group One, Group Two and Group Three to each company's respective
LTM revenue, LTM earnings before interest, taxes, depreciation and amortization
("EBITDA") and LTM earnings before interest and taxes ("EBIT"). DLJ's analysis
of Group One yielded the following averages: a LTM EPS multiple of 22.1x, a 1998
EPS multiple of 16.0x, a 1999 EPS multiple of 13.9x, a book value multiple of
5.6x, a LTM revenue multiple of 1.8x, a LTM EBITDA multiple of 7.0x, and a LTM
EBIT multiple of 12.5x. DLJ's analysis of Group Two yielded the following
averages: a LTM EPS multiple of 30.2x, a 1998 EPS multiple of 21.2x, a 1999 EPS
multiple of 16.7x, a book value multiple of 3.8x, a LTM revenue multiple of
4.3x, a LTM EBITDA multiple of 11.9x, and a LTM EBIT multiple of 18.1x. DLJ's
analysis of Group Three yielded the following averages: a LTM EPS multiple of
34.1x, a 1998 EPS multiple of 29.6x, a 1999 EPS multiple of 22.9x, a book value
multiple of 3.6x, a LTM revenue multiple of 3.7x, a LTM EBITDA multiple of
14.6x, and a LTM EBIT multiple of 21.2x.
Although DLJ reviewed the equity value and enterprise values of the Solid
Waste Companies, measured as a multiple of selected financial data, DLJ did not
rely on a comparison to the value of Waste Management as a multiple of the same
financial data in its valuation due to the absence of any meaningful
comparables.
M&A TRANSACTION ANALYSIS. DLJ reviewed 11 selected acquisitions involving
solid waste companies (the "M&A Transactions"): (i) USA Waste/United Waste
Systems, Inc.; (ii) SITA, S.A./Browning-Ferris Industries, Inc., European
operations; (iii) USA Waste/City Management Holdings Trust, waste divisions;
(iv) USA Waste/Allied Waste Industries, Inc., Canadian assets; (v) Allied Waste
Industries, Inc./Laidlaw Solid Waste Management Group; (vi) Republic Industries,
Inc./Addington Resources, Inc.; (vii) Republic Industries, Inc./Continental
Waste Industries, Inc.; (viii) USA Waste/Sanifill, Inc.; (ix) USA Waste/Western
Waste Industries; (x) USA Waste/Chambers Development Company, Inc.; and (xi)
Browning-Ferris Industries, Inc./Attwoods Group PLC. In examining these
acquisitions, DLJ compared the enterprise value of the acquired company implied
by each of these transactions as a multiple of LTM revenue, LTM EBITDA and LTM
EBIT, to the $20.3 billion implied enterprise value of Waste Management as a
multiple of the same financial data. DLJ's analysis of enterprise value as a
multiple of (i) LTM revenue yielded a range of 1.3x to 5.7x with an average of
3.3x, compared to 2.2x for Waste Management, (ii) LTM EBITDA yielded a range of
6.5x to 15.9x with an average of 11.4x, compared to 8.1x for Waste Management
and (iii) LTM EBIT yielded a range of 9.3x to 25.8x with an average of 18.6x,
compared to 14.5x for Waste Management. The analysis of multiples of enterprise
value showed that the implied enterprise value of Waste Management was within
the range of multiples for the comparable acquisitions in (i), (ii) and (iii).
DLJ also compared the equity value of the acquired company implied by each of
these transactions as a multiple of the latest reported book value, to the $13.3
billion implied equity value of Waste Management as a multiple of the same
financial data. DLJ's analysis of equity value as a multiple of book value
yielded a range of 1.7x to 7.1x with an average of 3.6x, compared to 10.0x for
Waste Management. The analysis of multiples of equity value showed that the
implied equity value of Waste Management was above the range of multiples for
the comparable acquisitions.
Although DLJ reviewed the equity value and enterprise values of the M&A
Transactions, measured as a multiple of selected financial data, DLJ noted that
this analysis was of limited relevance in its view because such analysis was
based on publicly available historical information, whereas prices paid in
transactions in the solid waste industry are generally based on future financial
expectations, for which data is unavailable.
STOCK PRICE HISTORY. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both USA Waste Common Stock and Waste
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Management Common Stock for the latest 12 month period and the 36 month period
ended March 6, 1998. DLJ also reviewed the daily closing prices of USA Waste
Common Stock and compared the USA Waste closing stock prices with the closing
stock prices of Browning-Ferris Industries, Inc. and the S&P 500 Index. This
information was presented solely to provide the USA Waste Board with background
information regarding the stock prices of USA Waste and Waste Management over
the periods indicated.
DISCOUNTED CASH FLOW ANALYSIS. DLJ performed a discounted cash flow ("DCF")
analysis of Waste Management using projections and assumptions provided by the
management of Waste Management. The DCFs for Waste Management were estimated
using discount rates ranging from 10% to 12% and estimated terminal EBITDA
multiples in 2002 for Waste Management ranging from 6.0x to 8.0x. The analysis
yielded per share equity values for Waste Management ranging from approximately
$32.36 to $50.08 (with Synergies, net of all projected costs associated with the
Merger) and from approximately $22.30 to $36.55 (without Synergies).
IMPLIED EXCHANGE RATIO ANALYSIS. DLJ analyzed the implied equity value per
share based on a DCF analysis of Waste Management compared to the implied equity
value per share based on a DCF analysis of USA Waste. The analysis, conducted
with and without Synergies, yielded implied exchange ratios ranging from 0.612
to 0.889 with an average of 0.751.
CONTRIBUTION ANALYSIS. DLJ analyzed the relative contributions of USA Waste
and Waste Management to the pro forma combined entity based on selected
financial data, assuming no Synergies. In this analysis, DLJ estimated USA
Waste's stand-alone enterprise value at approximately $12.1 billion, based on
230.6 million diluted shares of USA Waste Common Stock then outstanding and a
stock price of $38.63 per share (the market price of USA Waste Common Stock on
March 6, 1998). Based on the implied total enterprise value of the pro forma
combined entity ($12.1 billion estimated enterprise value for USA Waste plus the
$20.3 billion implied enterprise value for Waste Management), DLJ estimated that
USA Waste would contribute 37.4% and Waste Management would contribute 62.6% of
the pro forma combined entity's total enterprise value.
DLJ compared USA Waste's 37.4% contribution to the pro forma combined
entity's total enterprise value with the relative contribution of USA Waste to
certain financial data for the pro forma combined entity, including revenue,
EBITDA and EBIT for 1997 and projected 1998. In each case, the financial data
for the pro forma combined entity was determined by adding the financial data
for USA Waste and Waste Management. This analysis indicated that USA Waste would
contribute 22.1% and 29.4% of the pro forma combined entity's revenues for 1997
and projected 1998, respectively. This analysis also indicated that USA Waste
would contribute 28.3% and 37.3% of the pro forma combined entity's EBITDA for
1997 and projected 1998, respectively. This analysis also indicated that USA
Waste would contribute 32.7% and 44.3% of the pro forma combined entity's EBIT
for 1997 and projected 1998, respectively.
DLJ also compared the 40.1% ownership interest that holders of USA Waste
Common Stock will have in the pro forma combined entity with the relative
contribution of USA Waste to the estimated net income of the pro forma combined
entity (determined by adding the net income of USA Waste and Waste Management
for 1997 and projected 1998). This analysis indicated that USA Waste would
contribute 45.3% and 56.1% of the net income of the pro forma combined entity
for 1997 and projected 1998, respectively.
PREMIUMS PAID ANALYSIS. DLJ determined the implied premium based on the
Exchange Ratio over the trading prices one day, one week and one month prior to
the announcement date of 57 selected merger or acquisition transactions
involving companies not necessarily comparable to Waste Management. These
transactions were valued in excess of $5.0 billion in enterprise value and were
announced over the 36 month period prior to the date of the DLJ Opinion. The
average premiums for the selected transactions over the trading prices, one day,
one week, and one month prior to the announcement dates were 29.2%, 31.4% and
35.5%, respectively. For the Merger, the premiums derived based on the Exchange
Ratio, USA
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Waste's stock price of $38.63 as of March 6, 1998 and Waste Management's stock
price one day, one week, and one month prior to March 9, 1998 were 14.9%, 13.1%
and 16.7%, respectively.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ but describes, in summary form, the principal
elements of the presentation made by DLJ to the USA Waste Board on March 10,
1998. The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Each of the
analyses conducted by DLJ was carried out in order to provide a different
perspective on the transaction and to add to the total mix of information
available. DLJ did not form a conclusion as to whether any individual analysis,
considered in isolation, supported or failed to support an opinion as to
fairness from a financial point of view. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses taken as a whole.
Accordingly, notwithstanding the separate factors summarized above, DLJ has
indicated to USA Waste that it believes that its analyses 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 evaluation process underlying its opinion. The analyses performed by
DLJ are not necessarily indicative of actual values or future results, which may
be significantly more or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement agreement dated January 1, 1998, USA
Waste (i) has paid DLJ a fee of $2 million and (ii) will pay an additional fee
upon consummation of the Merger. Upon consummation of the Merger or certain
other business combinations between USA Waste and Waste Management, USA Waste
will pay DLJ a fee equal to (a) $10 million if the average of the closing price
per share of USA Waste Common Stock for the ten trading days prior to the date
five days prior to the Merger (the "Ten-Day Average Price") is less than or
equal to $40.00, (b) $10 million plus $6,000 for each cent ($0.01) by which the
Ten-Day Average Price is greater than $40.00 but less than $50.00 and (c) $16
million if the Ten-Day Average Price is greater than $50.00. The fee previously
paid to DLJ pursuant to clause (i) of the first sentence of this paragraph will
be deducted from any fee to which DLJ is entitled upon consummation of the
Merger (or other business combination). USA Waste has also agreed that if the
Merger or similar transaction is not consummated and USA Waste receives a
termination fee, USA Waste will pay DLJ $6 million in cash upon USA Waste's
receipt of the termination fee. Any fees previously paid to DLJ pursuant to this
engagement agreement will be deducted from any fee to which DLJ is entitled
pursuant to the preceding sentence. In addition, USA Waste agreed to reimburse
DLJ, upon request by DLJ from time to time, for all reasonable out-of-pocket
expenses (including the reasonable fees and expenses of counsel) incurred by DLJ
in connection with its engagement thereunder and to indemnify DLJ and certain
related persons against certain liabilities in connection with its engagement,
including liabilities under U.S. federal securities laws. DLJ and USA Waste
negotiated the terms of the fee arrangement, and the USA Waste Board was aware
of such arrangement, including the fact that a significant portion of the
aggregate fee payable to DLJ is contingent upon consummation of the Merger. DLJ
believes that the terms of this fee arrangement are customary in transactions of
this nature.
In the ordinary course of business, DLJ and its affiliates may own or
actively trade the securities of USA Waste 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 USA Waste or Waste Management securities.
DLJ, as part of its investment banking services, is regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. DLJ
has performed investment banking and other services for USA Waste in the past,
including (i) acting as USA Waste's financial advisor in connection with USA
Waste's merger with Western Waste Industries; (ii) acting as USA Waste's
financial advisor in connection with USA Waste's merger with Sanifill, Inc.;
(iii) acting as the lead manager in a public offering of USA Waste common stock
and convertible subordinated notes;
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(iv) acting as USA Waste's financial advisor in connection with USA Waste's
merger with United Waste Systems, Inc.; (v) acting as the lead manager in a
public offering of USA Waste senior notes completed in September 1997; and (vi)
acting as the lead manager in a public offering of USA Waste senior notes
completed in December 1997. DLJ also has performed investment banking and other
services for Waste Management in the past, including acting as underwriter in
connection with numerous debt offerings by Waste Management. DLJ has received
usual and customary compensation for its past services for USA Waste and Waste
Management.
WASTE MANAGEMENT
OPINION OF FINANCIAL ADVISOR. Waste Management retained Merrill Lynch to
act as its exclusive financial advisor in connection with a possible business
combination. On March 10, 1998, Merrill Lynch rendered to the Waste Management
Board its written opinion, confirmed in writing on June 5, 1998 (the "Merrill
Lynch Opinion"), that, as of such date and as of June 5, 1998, and based upon
and subject to the factors and assumptions set forth therein, the Exchange Ratio
was fair from a financial point of view to the holders of shares of Waste
Management Common Stock, other than USA Waste and its affiliates.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE
MERRILL LYNCH OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERRILL LYNCH
OPINION. WASTE MANAGEMENT STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY. THE MERRILL LYNCH OPINION WAS PROVIDED TO THE WASTE MANAGEMENT BOARD
FOR ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT
OF VIEW OF THE EXCHANGE RATIO TO THE HOLDERS OF WASTE MANAGEMENT COMMON STOCK,
OTHER THAN USA WASTE AND ITS AFFILIATES, DOES NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISION BY WASTE MANAGEMENT TO ENGAGE IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY WASTE MANAGEMENT STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE ON THE PROPOSED MERGER OR ANY MATTER RELATED THERETO.
The Exchange Ratio was determined through negotiations between USA Waste and
Waste Management and was approved by the Waste Management Board. Merrill Lynch
provided advice to Waste Management during the course of such negotiations.
The summary set forth below does not purport to be a complete description of
the analyses underlying the Merrill Lynch Opinion or the presentation made by
Merrill Lynch to the Waste Management Board. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Merrill Lynch did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Waste Management or USA Waste. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. In addition, as
described above, the Merrill Lynch Opinion was among several factors taken into
consideration by the Waste Management Board in making its determination to
approve the Merger Agreement and the Merger. Consequently, the Merrill Lynch
analyses described below should
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not be viewed as determinative of the decision of the Waste Management Board or
Waste Management's management with respect to the fairness of the Exchange
Ratio.
In arriving at its opinion, Merrill Lynch, among other things, (i) reviewed
certain publicly available business and financial information relating to Waste
Management and USA Waste which Merrill Lynch deemed to be relevant, (ii)
reviewed certain information, including financial forecasts, relating to the
business, earnings, cash flow, assets, liabilities and prospects of each of
Waste Management and USA Waste, as well as the amount and timing of the cost
savings, related expenses and a range of synergies expected to result from the
Merger (the "Expected Synergies"), furnished to Merrill Lynch by Waste
Management and USA Waste, respectively, (iii) conducted discussions with members
of senior management and representatives of Waste Management and USA Waste
concerning the matters described in clauses (i) and (ii) above, as well as their
respective businesses and prospects before and after giving effect to the
Merger, and the Expected Synergies, (iv) reviewed the market prices and
valuation multiples for Waste Management Common Stock and USA Waste Common Stock
and compared them with those of certain publicly traded companies which Merrill
Lynch deemed to be relevant, (v) reviewed the results of operations of Waste
Management and USA Waste and compared them with those of certain publicly traded
companies which Merrill Lynch deemed to be relevant, (vi) compared the proposed
financial terms of the Merger with the financial terms of certain other
transactions which Merrill Lynch deemed to be relevant, (vii) participated in
certain discussions and negotiations among representatives of Waste Management
and USA Waste and their financial and legal advisors, (viii) reviewed the
potential pro forma impact of the Merger, (ix) reviewed a draft of the Merger
Agreement dated March 7, 1998 and (x) reviewed such other financial studies and
analyses and took into account such other matters as Merrill Lynch deemed
necessary, including Merrill Lynch's assessment of general economic, market and
monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying such information and Merrill Lynch has not undertaken an independent
evaluation or appraisal of any of the assets or liabilities of Waste Management
or USA Waste or been furnished with any such evaluation or appraisal. In
addition, Merrill Lynch did not assume any obligation to conduct any physical
inspection of the properties or facilities of Waste Management or USA Waste.
With respect to the financial forecast information and the Expected Synergies
furnished to or discussed with Merrill Lynch by Waste Management or USA Waste,
Merrill Lynch assumed that they have been reasonably prepared or reviewed and
reflect the best currently available estimates and judgment of Waste
Management's or USA Waste's management as to the expected future financial
performance of Waste Management or USA Waste, as the case may be, and the
Expected Synergies. Merrill Lynch further assumed that the Merger will be
accounted for as a pooling of interests under generally accepted accounting
principles and that it will qualify as a tax-free reorganization for U.S.
federal income tax purposes. Merrill Lynch also assumed that the final form of
the Agreement would be substantially similar to the last draft reviewed by
Merrill Lynch.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Merrill Lynch assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger. In connection with the
preparation of its opinion, Merrill Lynch was not authorized by Waste Management
or the Waste Management Board to solicit, nor did Merrill Lynch solicit,
third-party indications of interest for the acquisition of all or any part of
Waste Management.
The Merger provides for a fixed exchange ratio of 0.725 of a share of USA
Waste Common Stock for each share of Waste Management Common Stock. Based on the
closing price of USA Waste Common Stock on February 27, 1998 (time of initial
negotiation) of $41.63, the Exchange Ratio results in an implied price per share
of $30.18 and based on the closing price of USA Waste Common Stock on March 6,
1998 of
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$38.63 (last trading day prior to preparation of materials for Merrill Lynch's
presentation to the Waste Management Board), the Exchange Ratio results in an
implied price per share of $28.00. After giving effect to the Merger,
stockholders of Waste Management would have a fully diluted ownership interest
of approximately 60% in the pro forma combined company, based on the Exchange
Ratio.
The following is a brief summary of the material analyses presented by
Merrill Lynch to the Waste Management Board in connection with the rendering of
the Merrill Lynch Opinion.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch calculated, using a discounted
cash flow methodology, a range of per share equity values for Waste Management
based on projections prepared by management of Waste Management for the years
1998 to 2002, a range of 2002 terminal EBITDA multiples from 6.5x to 8.5x and a
range of discount rates from 10.5% to 12.5%. Based on its analysis, Merrill
Lynch derived a summary reference range of implied per share equity values
(including approximately $7 to $9 related to cost savings initiatives) of $23.50
to $33.50.
COMPARISON OF SELECTED COMPARABLE COMPANIES. Merrill Lynch compared the
trading multiples for Waste Management to corresponding multiples of a selected
group of waste service companies consisting of Browning-Ferris Industries,
Republic Industries Inc., USA Waste and Allied Waste Industries Inc. (the "Waste
Services Group"). The ratio of Waste Management's price to earnings, excluding
non-recurring and unusual items ("P/E ratio") for calendar years 1997, 1998 and
1999 were 26.2x, 27.1x and 19.2x, respectively, based on the closing price of
Waste Management Common Stock on March 6, 1998 of $24.38. Merrill Lynch noted
that the Waste Management Common Stock price of $24.38 likely reflected market
speculation regarding a possible business combination involving USA Waste.
Merrill Lynch indicated that absent such possible speculation and based on the
fundamental prospects as outlined in Waste Management's projections, the trading
value of Waste Management Common Stock was likely to be lower. Merrill Lynch
calculated the mean of the P/E ratios for the Waste Services Group for such
periods to be 29.4x, 19.9x and 16.0x, respectively, and the median of the P/E
ratios to be 30.3x, 19.8x and 15.8x, respectively. Waste Management's five-year
estimated growth rate was 11% compared to the mean and median for the Waste
Services Group of 23% and 24%, respectively, for the same period. Waste
Management's ratio of P/E ratio for calendar years 1998 and 1999 to the
five-year estimated growth rate were 2.46x and 1.74x, respectively, compared to
the mean and median for the Waste Services Group of 0.95x and 0.88x,
respectively, for calendar year 1998, and 0.77x and 0.69x, respectively, for
calendar year 1999. Based on its analysis, Merrill Lynch derived a summary
reference range of implied per share equity values of $18 to $20.
No company in the Waste Services Group is identical to Waste Management.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading value of Waste Management and the companies in the Waste
Services Group.
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS. Merrill Lynch reviewed
certain publicly available information regarding 16 selected waste services
related acquisitions and calculated historical and forward (to the extent of
available information) EBITDA and net income multiples for such transactions.
The mean and median of offer values as multiples of LTM net income for the
comparable transactions were 43.4x and 38.5x, respectively. The mean and median
of transaction values as multiples of LTM EBITDA for the comparable transactions
were 12.2x and 11.6x, respectively. The mean and median offer values as
multiples of forward net income for the comparable transactions were 17.3x and
17.0x, respectively. Based on its analysis of such multiples, Merrill Lynch
calculated a summary reference range of implied per share equity values of the
Waste Management Common Stock of $22 to $40 based on LTM EBITDA, $14 to $18
based on 1998 projected net income and $19 to $25 based on 1999 projected net
income.
No company or transaction used in the above analysis as a comparison was
identical to Waste Management or USA Waste or the Merger, respectively.
Accordingly, an analysis of the results of the
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comparison is not purely mathematical; rather it involves complex considerations
and judgments concerning differences in historical projected financial and
operating characteristics of the comparable acquired companies and other factors
that could affect the acquisition value of such companies and Waste Management.
RELATIVE CONTRIBUTION ANALYSIS. Merrill Lynch compared the pro forma fully
diluted equity ownership interest of 60% for the stockholders of Waste
Management to the pro forma percent contributions of Waste Management to the net
income of the pro forma combined company (excluding the impact of potential
synergies) of 44% and 46% in 1998 and 1999, respectively. Merrill Lynch also
compared the pro forma fully diluted enterprise ownership interest of 63% for
the stockholders of Waste Management to the pro forma percent contributions of
Waste Management to the EBITDA of the pro forma combined company (excluding the
impact of potential synergies) of 63% and 60% in 1998 and 1999, respectively.
RELATIVE DISCOUNTED CASH FLOW ANALYSIS. Using a relative discounted cash
flow methodology, Merrill Lynch also calculated a range of implied Waste
Management/USA Waste exchange ratios based on projections prepared by the
managements of Waste Management and USA Waste in connection with the Merger, a
range of 2002 terminal EBITDA multiples of 6.5x to 8.5x and a range of relative
discounted rates of 10.5% to 12.5%. The implied Waste Management/USA Waste
exchange ratios resulting from the Relative Discounted Cash Flow Analysis ranged
from 0.50x to 0.79x.
EARNINGS PER SHARE ANALYSIS. Merrill Lynch calculated the impact that the
Merger would have on pro forma EPS accretion (dilution) of Waste Management
based on the projections prepared by the managements of Waste Management and USA
Waste and assuming synergies of (a) $0 in each of 1998, 1999 and 2000, (b) $100
million in 1998, $400 million in 1999 and $420 million in 2000, and (c) $200
million in 1998, $800 million in 1999 and $840 million in 2000 resulting from
the Merger. The analysis indicated that the Merger would result in significant
EPS accretion for the stockholders of Waste Management for the 1998, 1999 and
2000 fiscal years under each of the synergy scenarios set forth above in clauses
(a), (b) and (c).
Pursuant to a letter agreement between Waste Management and Merrill Lynch,
Waste Management agreed to pay Merrill Lynch (i) a fee of $1 million payable
upon the execution of the letter agreement, (ii) a fee of $2 million contingent
upon and payable in cash upon the execution of the Merger Agreement and (iii)
upon consummation of the Merger or certain other business combination involving
Waste Management and USA Waste, a fee in an amount equal to the aggregate
consideration paid in the Merger or such other business combination (determined
as of the closing of such transaction) multiplied by a percentage equal to (a)
0.10%, if the per share consideration is less than or equal to $25, (b) 0.10%
plus (A) 0.0002% multiplied by (B) the number of cents ($0.01) by which the per
share consideration is greater than $25, if the per share consideration is
greater than $25 and less than $35, or (c) 0.30%, if the per share consideration
is $35 or greater. Any fees previously paid to Merrill Lynch under clauses (i)
and (ii) above will be deducted from any fee to which Merrill Lynch is entitled
pursuant to clause (iii). Waste Management also agreed that if it consummates a
business combination with a party other than USA Waste, Waste Management will
pay Merrill Lynch an additional fee in an amount to be mutually agreed upon by
Waste Management and Merrill Lynch.
Additionally, Waste Management agreed to reimburse Merrill Lynch for
reasonable out-of-pocket expenses, including, without limitation, reasonable
fees and disbursements of its legal counsel. Waste Management has also agreed to
indemnify Merrill Lynch and certain related persons for certain liabilities
related to or arising out of its engagement, including liabilities under the
federal securities laws.
Waste Management retained Merrill Lynch based upon Merrill Lynch's
experience and expertise. Merrill Lynch is an internationally recognized
investment banking and advisory firm. Merrill Lynch, as part of its investment
banking business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary
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distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Merrill Lynch most recently advised Waste Management regarding the recently
completed purchase of the shares of WTI that Waste Management did not previously
own, and has, in the past, provided financial advisory and financing services to
Waste Management and USA Waste and may provide such services to the surviving
corporation in the Merger and/or its affiliates and may receive fees for the
rendering of such services. In addition, in the ordinary course of its business,
Merrill Lynch and its affiliates may actively trade the debt and equity
securities of Waste Management and USA Waste for their own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
USA WASTE
In considering the recommendations of the USA Waste Board regarding approval
of the Charter Proposal and Share Issuance Proposal, USA Waste stockholders
should be aware of interests which certain officers and directors of USA Waste,
and certain persons designated by USA Waste to become directors of New Waste
Management, have in the Merger that may be different from your and their
interests as stockholders generally.
CONTINUING BOARD POSITIONS. The following members of the USA Waste Board
are expected to become members of the New Waste Management Board as of the
Effective Time: Ralph F. Cox, John E. Drury, Richard J. Heckmann, Richard D.
Kinder, Rodney R. Proto and Jerome B. York. Mr. Drury, Chief Executive Officer
of USA Waste, will continue to serve as Chief Executive Officer of New Waste
Management, and Mr. Proto, President and Chief Operating Officer of USA Waste,
and Earl E. DeFrates, Executive Vice President and Chief Financial Officer of
USA Waste, are expected to continue to serve in such capacities of New Waste
Management. See "-- Directors and Executive Officers and Operations of the
Combined Company Following the Merger" below.
STOCK OPTIONS. None of the executive officers or directors of USA Waste
will receive payments or accelerated vesting under any USA Waste compensation
plan, program or arrangement as a result of the Merger.
STOCK OWNERSHIP. As of May 1, 1998, current directors and executive
officers of USA Waste may be deemed to be beneficial owners of an aggregate of
approximately 23,957,817 shares of USA Waste Common Stock, or approximately
[ ]% of the shares of USA Waste Common Stock outstanding as of the USA
Waste Record Date. Each of such directors and executive officers of USA Waste
has advised USA Waste that he or she intends to vote or direct the vote of all
the outstanding shares of USA Waste Common Stock over which he or she has or
shares voting control in favor of the approval of the Charter Proposal and the
Share Issuance Proposal. See "The Companies -- USA Waste -- Stock Ownership of
Management".
RELATIONAL INVESTORS, LLC. Ralph V. Whitworth, one of the seven persons
designated by USA Waste to serve as an initial director of New Waste Management,
is a principal and managing member of Relational Investors, which acts as a
financial advisor to USA Waste in connection with the Merger. Pursuant to a
letter agreement between USA Waste and Relational Investors, USA Waste agreed to
pay Relational Investors (i) a fee of $500,000 payable upon execution of the
letter agreement, (ii) a fee in an amount equal to 7.5% of the "Profits" (as
defined in such letter agreement) realized by USA Waste relating to its
ownership of securities of Waste Management, but, in any event, in an amount not
to exceed $3 million and (iii) upon consummation of the Merger or certain other
business combinations involving USA Waste and Waste Management, a fee of $10
million less the amount paid pursuant to clauses (i) and (ii). USA Waste has
also agreed that if the Merger or a similar transaction is not consummated and
USA Waste receives a termination fee, USA Waste will pay Relational Investors a
fee equal to 5% of such
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termination fee; provided that such fee paid to Relational Investors shall not
exceed $7.5 million less any amounts paid pursuant to clauses (i) or (ii) of the
preceding sentence. Additionally, USA Waste agreed to reimburse Relational
Investors for third-party expenses and to indemnify Relational Investors and
certain related persons for certain liabilities related to or arising out of its
engagement, including liabilities under the federal securities laws. USA Waste
does not expect that Relational Investors will provide financial advisory
services to New Waste Management following the Merger.
Relational Investors is the general partner of the Limited Partnership,
which was formed in November 1997 for the purpose of acquiring shares of Waste
Management Common Stock. See "The Merger-- Background of the Merger". Relational
Investors also is the general partner to three limited partnerships, and serves
as asset manager for a managed account, which were limited partners in the
Limited Partnership and which held, in the aggregate, a 51% interest in the
Limited Partnership. As general partner of these three limited partnerships,
Relational Investors receives management fees in respect of funds committed to
the limited partnerships and has the right to receive incentive fees in respect
of any net profits (as defined) earned by the limited partnerships.
Mr. Whitworth owns an approximately 30% equity interest in Relational
Investors and, accordingly, is allocated a pro rata portion of Relational
Investors' annual profits and losses.
As of June 1, 1998, in the ordinary course of its business, Relational
Investors held 500,000 shares of USA Waste Common Stock for the account of one
of its customers.
WASTE MANAGEMENT
In considering the recommendation of the Waste Management Board regarding
adoption of the Merger Agreement, Waste Management stockholders should be aware
of interests which certain of the individuals who have served as directors or
executive officers of Waste Management since January 1, 1997 have in the Merger
that are different from your and their interests as stockholders generally.
CONTINUING BOARD POSITIONS. The following seven members of the Waste
Management Board are expected to become directors of New Waste Management as of
the Effective Time: H. Jesse Arnelle, Pastora San Juan Cafferty, Roderick M.
Hills, Robert S. Miller, Paul M. Montrone, John C. Pope and Steven G. Rothmeier.
Mr. Miller will, as of the Effective Time, be elected to a 12-month term as non-
executive Chairman of the New Waste Management Board. See "-- Directors and
Executive Officers and Operations of the Combined Company Following the Merger".
STOCK OPTIONS. At May 1, 1998, approximately 2,777,618 shares of Waste
Management Common Stock were subject to options granted to executive officers
and directors under compensatory equity-based plans of Waste Management. All of
such outstanding Waste Management stock options which have not yet become
exercisable, other than stock options granted on or after March 10, 1998, will
become exercisable in full from and after the date of a change in control of
Waste Management. Options granted from May 9, 1997 through March 9, 1998 will
remain exercisable for their full term upon a change in control of Waste
Management, regardless of employment status. The Merger constitutes a change in
control of Waste Management within the meaning of the stock option plans.
Under the terms of all stock options granted prior to May 9, 1997, optionees
have the right to require Waste Management to purchase their options for a
period of one year from the date of a change in control of Waste Management at a
price equal to (i) the excess of the fair market value per share over the option
price, multiplied by (ii) the number of option shares specified by the optionee
for purchase. The Waste Management Board has amended the plans related to these
stock options to provide that payment for such options may, in the discretion of
the committee of the Board of Directors of New Waste Management administering
such plans, be made by New Waste Management by delivery of shares of common
stock of the combined company ("New Waste Management Common Stock") rather than
cash.
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RESTRICTED STOCK. Certain of the executive officers and the directors of
Waste Management have been granted awards of restricted stock. Except for
Messrs. Getz and Koenig, the executive officers' restricted stock will vest and
all restrictions thereon will lapse upon the closing of the Merger. The
directors' restricted stock will vest upon the closing of the Merger, but the
restrictions will not lapse until the end of the restricted period. The
restricted stock held by each of Messrs. Getz and Koenig has previously vested
in full pursuant to the terms of their restricted stock agreements, but the
restrictions on transfer will not lapse until the expiration date of their
respective non-competition agreements with Waste Management.
EMPLOYMENT AGREEMENTS. Certain of the executive officers of Waste
Management have agreements with Waste Management that provide for payments to be
made to them upon termination or constructive termination of their employment
with Waste Management or New Waste Management. Such agreements with each of
Messrs. Caudle, Chappel, Cole, Collier, George, Holsten, O'Connor, Payne and
Spears provide that upon the executive's termination or constructive termination
of employment, he will receive continued base salary for two years, which may be
paid in equal installments over three years at his election (except for Mr.
Spears, whose contract entitles him to continue base salary for one year, which
may be paid over two years, at his election). Medical, dental and vision
coverage will be continued during the severance period, stock options will
accelerate (to the extent they have not already accelerated as a result of the
Merger), pro-rated awards will be paid under the Waste Management annual and
long-term incentive plans and credit will be given for benefit service under the
Waste Management SERP. In addition, Mr. Holsten's agreement provides for
severance pay in the amount of three year's base salary (which may be paid in
equal installments over four years) and Mr. George's agreement provides that he
will receive a gross-up payment for any applicable excise tax under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code").
Mr. Getz has an employment agreement that provides for payments of salary
and pro-rated bonus for three years in the event that Waste Management
terminates his agreement or constructively terminates his employment, plus a
gross-up payment for any applicable excise tax under Section 4999 of the Code.
On March 10, 1998, the Waste Management Board approved an amendment to Mr.
Getz's employment agreement to fix the amounts payable thereunder at $900,000
per year in the event Waste Management terminates Mr. Getz's employment without
cause or he is constructively discharged. This amount represents his current
base salary plus his target annual and long-term incentive levels. In
consideration thereof, Waste Management obtained a commitment from Mr. Getz to
remain with Waste Management through the Merger and for a reasonable transition
time thereafter, which will be until at least June 30, 1999 unless terminated
earlier by Waste Management.
Mr. Miller has an agreement with Waste Management dated October 29, 1997
under which he agreed to serve as Chairman of the Board and Acting Chief
Executive Officer. The agreement continues until the earlier of (a) approval by
the Waste Management Board of the hiring of a successor as Chairman of the Board
and Chief Executive Officer, (b) Mr. Miller's death or disability, or (c)
termination of his service upon written notice given either by Mr. Miller or the
Waste Management Board at least seven days prior to the effective date of such
termination. The agreement provides that Mr. Miller will be paid a salary at the
annual rate of $600,000 for so long as he serves as Chairman of the Board and
Acting Chief Executive Officer of Waste Management. Pursuant to the agreement,
on November 4, 1997 Mr. Miller was granted an option to purchase 75,000 shares
of Waste Management Common Stock at an exercise price of $23.375, exercisable
upon the earlier of (a) the Waste Management Board's approval of the hiring of
Mr. Miller's successor as Chairman of the Board and Chief Executive Officer of
Waste Management, (b) Mr. Miller's death or disability, or (c) the termination
of Mr. Miller's employment by the Waste Management Board. Upon becoming
exercisable, the option will remain exercisable through the earlier of November
3, 2007 or the 90th day after Mr. Miller ceases to serve as a member of the
Waste Management Board. On March 10, 1998, the Waste Management Board appointed
Mr. Miller as Chief Executive Officer, approved an increase in his annual salary
to $900,000, named him as a participant in the annual incentive plan and
established his 1998 annual incentive target level at 80% of his salary, and
granted him an option for
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<PAGE>
221,425 shares of Waste Management Common Stock at an exercise price of $24.3875
on the same terms as his November 4, 1997 stock option grant. The options expire
ten years after their grant or, if earlier, 90 days following Mr. Miller's
retirement from the Waste Management Board.
SERP PAYMENTS. As a result of the Merger, the current or former executive
officers who are participants in the SERP will receive service credit for
additional years of service over their severance periods (as would be provided
under their employment agreements) and become vested in any benefits accrued
thereunder. Additionally, the Merger Agreement provides that the SERP will be
terminated at or prior to the closing of the Merger and all accrued benefits
will be paid to participants in a lump sum (the "SERP Lump Sum Payment").
PLUS PLAN. Certain of the current or former executive officers have accrued
balances under the Waste Management Non-Qualified Retirement Savings Plus Plan
(the "Plus Plan") which are as a result of receiving a 20% matching contribution
(valued on the basis of Waste Management Common Stock) on voluntary deferrals of
their awards under Waste Management's annual management incentive compensation
plan. As a result of the Merger, all such balances under the Plus Plan will
become vested.
RETENTION INCENTIVE AWARDS. Certain of the current executive officers of
Waste Management have been granted retention incentive awards that will be paid
to them on April 1, 1999 or, if later, six months following the closing of the
Merger (the "Retention Incentive Awards"). However, if the executive officer's
employment is terminated or constructively terminated prior to such date, the
Retention Incentive Award will be paid as of such termination date. If the
executive officer voluntarily terminates employment prior to such date, the
Retention Incentive Award will be forfeited. The New Waste Management Board
will, in its absolute discretion, consider whether to award additional
compensation to each of Messrs. Chappel, George, Getz and/or Holsten after the
closing of the Merger and based on their respective individual performances
assisting in the Merger and the integration of the two companies. This
discretionary award will not be available to any of these executive officers if
he voluntarily terminates his employment before the payment of the award.
The following table sets forth, as of April 30, 1998, the estimated maximum
value to the individuals who have served as directors or executive officers of
Waste Management since January 1, 1997, of certain benefits that may be paid,
vested or accelerated as a result of the Merger. The benefits include the value
of outstanding unvested stock options, unvested restricted stock, SERP Lump Sum
Payments, unvested Plus Plan payments and Retention Incentive Awards held by the
listed individuals.
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<PAGE>
ESTIMATED MAXIMUM VALUE OF POTENTIAL
BENEFITS TO WASTE MANAGEMENT'S CURRENT AND
FORMER EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
VALUE OF VALUE OF VALUE OF ESTIMATED VALUE OF
UNVESTED RESTRICTED ESTIMATED PLUS PLAN RETENTION TOTAL
OPTIONS STOCK SERP BALANCES INCENTIVE POTENTIAL
ACCELERATED ACCELERATED LUMP SUM VESTED AWARD BENEFITS FROM
BY MERGER(1) BY MERGER(2) PAYMENTS(3) BY MERGER PAYMENTS MERGER(4)(5)
------------ ------------ ------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT EXECUTIVE OFFICERS:
Jerry W. Caudle........... $ 106,482 $ 720,585 $ 1,861,070 $ 65,318 $ 243,750 $ 2,997,205
Donald R. Chappel......... $ 76,499 $ 533,656 $ 337,898 $ 19,084 -- $ 967,137
Michael J. Cole........... $ 102,548 $ 699,480 $ 1,433,876 $ 44,710 $ 236,250 $ 2,516,864
L. Michael Collier........ $ 103,824 $ 720,585 $ 1,657,799 $ 35,259 $ 243,750 $ 2,761,217
Paul G. George............ -- -- $ 143,186 -- -- $ 143,186
Herbert A. Getz........... $ 359,334 -- $ 923,620 -- -- $ 1,282,954
Joseph M. Holsten......... $ 237,569 $1,704,313 $ 1,711,344 -- -- $ 3,653,226
John M. Kehoe, Jr......... $ 183,376 -- $ 1,426,017 -- -- $ 1,609,393
Robert S. Miller.......... $ 769,725 $ 46,063 -- -- -- $ 815,788
James E. O'Connor......... $ 104,621 $ 711,540 $ 1,564,609 $ 15,793 $ 240,000 $ 2,636,563
D.P. Payne................ $ 218,715 $ 985,905 $ 926,496 $ 100,272 $ 243,750 $ 2,475,138
Mark T. Spears............ -- -- $ 160,589 -- $ 311,000 $ 471,589
CURRENT DIRECTORS:
H. Jesse Arnelle.......... -- $ 17,018 -- -- -- $ 17,018
Pastora San Juan
Cafferty................ $ 13,425 -- -- -- -- $ 13,425
James B. Edwards.......... $ 33,450 $ 17,018 -- -- -- $ 50,468
Donald F. Flynn........... -- -- $ 1,924,526 -- -- $ 1,924,526
Roderick M. Hills......... $ 23,662 $ 136,781 -- -- -- $ 160,443
Paul M. Montrone.......... $ 31,950 -- -- -- -- $ 31,950
Peer Pedersen............. $ 2,184,174
James R. Peterson......... $ 1,241,427
John C. Pope.............. $ 23,663 $ 61,573 -- -- -- $ 85,236
Steven G. Rothmeier....... -- $ 17,018 -- -- -- $ 17,018
FORMER EXECUTIVE
OFFICERS AND DIRECTORS:
Dean L. Buntrock.......... -- -- $ 13,426,532 $ 434,602 -- $ 13,861,134
Jerry E. Dempsey.......... -- -- $ 536,258 -- -- $ 536,258
Thomas C. Hau............. -- -- $ 974,029 $ 33,280 -- $ 1,007,309
Peter H. Huizenga......... -- -- $ 1,101,528 -- -- $ 1,101,528
William P. Hulligan....... $ 206,456 -- $ 2,429,413 $ 108,780 -- $ 2,744,649
James E. Koenig........... -- -- $ 2,571,776 -- -- $ 2,571,776
Phillip B. Rooney......... -- -- $ 12,158,536 $ 369,432 -- $ 12,527,968
Alexander B. Trowbridge... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) The estimated value represents the number of shares of Waste Management
Common Stock subject to currently unvested stock options that become vested
and exercisable as a result of consummating the Merger, multiplied by the
"Option Spread." For purposes of this table, the "Option Spread" is equal to
the difference between the exercise price per share of each such option and
the per share closing price of Waste Management Common Stock on April 30,
1998 ($33.50 per share) (the "Closing Price").
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<PAGE>
(2) The estimated value represents the number of shares of restricted stock with
respect to which the restrictions will lapse as a result of consummating the
Merger, multiplied by the Closing Price.
(3) The estimated value represents total SERP payments, including amounts that
will be vested prior to the Merger, determined on the basis of certain
actuarial and other assumptions as applied to information currently
available to Waste Management, which may be subject to change.
(4) The estimated value of the total potential benefits from the Merger
represents the aggregate of the estimated value of the outstanding unvested
stock options accelerated by the Merger, unvested restricted stock
accelerated by the Merger, SERP Lump Sum Payments, unvested Plus Plan
payments vested by the Merger and Retention Incentive Awards as a result of
the Merger. This does not include the value of stock options and restricted
stock that are fully vested prior to (and thus unaffected by) the Merger.
(5) Includes a total of approximately $2,184,174 and $1,241,427 for Messrs.
Pedersen and Peterson, respectively, representing the estimated value (as of
April 30, 1998) of their account balances under two unfunded deferred
compensation plans of Waste Management in which certain of Waste
Management's non-employee directors have participated, the Waste Management,
Inc. Deferred Directors' Fee Plan and the Waste Management, Inc. Directors'
Phantom Stock Plan. Under the terms of these plans, such amounts will be
payable following the date the director ceases to be a member of the Waste
Management Board which will occur not later than the consummation of the
Merger.
INDEMNIFICATION. Pursuant to the Merger Agreement, New Waste Management
will guarantee the obligations of the Surviving Corporation to indemnify each
present and former director and officer of Waste Management against liabilities
or expenses incurred in connection with claims relating to matters prior to the
closing of the Merger, and to maintain in effect directors' and officers'
liability insurance for their benefit. In addition, New Waste Management will
guarantee the obligations of the Surviving Corporation under indemnification
agreements entered into by Waste Management with each of its directors and
executive officers pursuant to which Waste Management agreed, among other
things, to indemnify such persons to the fullest extent permitted by Delaware
law. See "The Merger Agreement -- Director and Officer Indemnification".
STOCK OWNERSHIP. As of May 1, 1998, current directors and executive
officers of Waste Management and their affiliates may be deemed to be beneficial
owners of approximately 1,104,339 shares of Waste Management Common Stock,
representing less than 1% of the shares of Waste Management Common Stock
outstanding as of the Waste Management Record Date. Each of such directors and
executive officers of Waste Management has advised Waste Management that he or
she intends to vote or direct the vote of all the outstanding shares of Waste
Management Common Stock over which he or she has or shares voting control in
favor of the approval and adoption of the Merger Agreement. See "The Companies
- -- Waste Management -- Stock Ownership of Management".
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY FOLLOWING THE MERGER
The USA Waste Board has approved the transactions contemplated by the Merger
Agreement, including the expansion of the USA Waste Board to 14 members as of
the Effective Time and the election of seven nominees of Waste Management to be
initial members of the New Waste Management Board. Each of USA Waste's
directors, with the exception of John E. Drury and Rodney R. Proto, has
submitted his resignation as director to be effective as of the day immediately
preceding the date of the Merger.
The New Waste Management Board, immediately following the Effective Time,
will consist of the following 14 persons: Ralph F. Cox, John E. Drury, Richard
J. Heckmann, Richard D. Kinder, Rodney R. Proto, Ralph V. Whitworth and Jerome
B. York (all of whom are nominees and, with the exception of Mr. Whitworth, are
currently directors of USA Waste), H. Jesse Arnelle, Pastora San Juan Cafferty,
Roderick M. Hills, Robert S. Miller, Paul M. Montrone, John C. Pope and Steven
G. Rothmeier (all of
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<PAGE>
whom are nominees and currently directors of Waste Management). Set forth below
is certain information with respect to these individuals:
<TABLE>
<CAPTION>
POSITION WITH NEW WASTE MANAGEMENT
NAME AGE IMMEDIATELY FOLLOWING THE MERGER
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
H. Jesse Arnelle 64 Director
Dr. Pastora San Juan Cafferty 57 Director
Ralph F. Cox 65 Director
John E. Drury 54 Chief Executive Officer and Director
Richard J. Heckmann 54 Director
Roderick M. Hills 68 Director
Richard D. Kinder 53 Director
Robert S. Miller 56 Non-Executive Chairman of the Board and Director
Paul M. Montrone 57 Director
John C. Pope 49 Director
Rodney R. Proto 49 President, Chief Operating Officer and Director
Steven G. Rothmeier 51 Director
Ralph V. Whitworth 42 Director
Jerome B. York 60 Director
</TABLE>
H. JESSE ARNELLE has served as a director of Waste Management since 1992 and
was senior partner of Arnelle, Hastie, McGee, Willis and Greene, a San
Francisco-based law firm, until his retirement in 1997. Mr. Arnelle currently
serves as "Of Counsel" to Womble, Carlyle, Sandridge and Rice of Winston-Salem,
North Carolina. He also served as Vice Chairman and Chairman of the Board of
Trustees of the Pennsylvania State University from 1992 to 1998. Mr. Arnelle is
also a director of Florida Power & Light (FPL Group), Eastman Chemical
Corporation, Textron Corporation, Wells Fargo & Company and Wells Fargo Bank
N.A., Armstrong World Industries and Union Pacific Resources, Inc.
DR. PASTORA SAN JUAN CAFFERTY has served as a director of Waste Management
since July 1994. She has been a Professor since 1985 at the University of
Chicago, where she has been a member of the faculty since 1971. Dr. Cafferty
also serves as a director of Kimberly-Clark Corporation, Harris Bankcorp and its
subsidiary, Harris Trust and Savings Bank, Harris Bankmont Inc. and People's
Energy Corporation and on the Boards of the Rush-Presbyterian-St. Luke's Medical
Center and the Lyric Opera Association, both in Chicago.
RALPH F. COX has served as a director of USA Waste since 1996 and was a
director of Sanifill from September 1993 until December 1996. Since February 1,
1994, Mr. Cox has been a management consultant. For four years prior thereto,
Mr. Cox was President of Greenhill Petroleum Corporation, a subsidiary of
Western Mining Corporation. From 1985 through 1990, he served as President and
Chief Operating Officer of Union Pacific Resources Company, a petroleum
exploration and production company. Before 1985, Mr. Cox spent 31 years with
Atlantic Richfield Company ("ARCO"), joining the ARCO board in 1978, assuming
responsibility for ARCO's worldwide petroleum exploration and production
activities and minerals exploration and production activities in 1984, and
culminating with his election as Vice Chairman of ARCO in 1985. Mr. Cox serves
as a director of Bonneville Pacific Corporation, an independent power company;
Daniel Industries, Inc., which manufactures oil and gas measurement and flow
control equipment; Rio Grande, Inc., a petroleum exploration and production
company; and CH2M Hill, a consulting engineering firm. He also serves as an
Independent Trustee for The Fidelity Group of funds.
JOHN E. DRURY has served as Chairman of the Board since June 30, 1995, and
Chief Executive Officer and a director of USA Waste since May 27, 1994. From
1991 to May 1994, Mr. Drury served as a Managing
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<PAGE>
Director of Sanders Morris Mundy Inc. ("SMMI"), a Housston based investment
banking firm. Prior thereto, Mr. Drury served in various management capacities
at BFI, including President and Chief Operating Officer of BFI from 1982 to
1991.
RICHARD J. HECKMANN has served as a director of USA Waste since 1994. Mr.
Heckmann is Chairman, President and Chief Executive Officer of United States
Filter Corporation ("U.S. Filter"), a position he assumed in July 1990. Prior to
joining U.S. Filter, Mr. Heckmann was a Senior Vice President -- Investments and
Branch Manager of Prudential-Bache Securities in Rancho Mirage, California. Mr.
Heckmann is also a director of K2 Inc. and United Rentals, Inc.
RODERICK M. HILLS has served as a director of Waste Management since
November 1997, President of Hills Enterprises, Ltd. (formerly The Manchester
Group Ltd.), a consulting firm, since 1987 and as a Partner in Hills & Hills, a
law firm, since 1994. Mr. Hills has also served as Vice Chairman of Oak
Industries, Inc., a manufacturing firm, since 1989. Mr. Hills served from
September to November 1996 as Chairman of Federal-Mogul Corporation, an
automotive parts manufacturing firm. Mr. Hills served as Chairman of the
Securities and Exchange Commission from 1975 to 1977 and as counsel to the
President of the United States in 1975. Mr. Hills is also a Director of
Federal-Mogul Corporation and Oak Industries, Inc.
RICHARD D. KINDER has served as a director of USA Waste since 1997 and has
been Chairman and Chief Executive Officer of Kinder Morgan Energy Partners,
L.P., a master limited partnership headquartered in Houston, Texas since
February 1997. From 1990 through December 1996, he was President and Chief
Operating Officer of Enron Corp. Prior thereto, Mr. Kinder served in various
management and legal positions with Enron Corp. and its affiliates commencing in
1980. Mr. Kinder is also a director of Baker Hughes Incorporated, K N Energy,
Inc. and Transocean Offshore Inc. He is past Chairman of the Interstate Natural
Gas Association of America and is a Trustee of the Museum of Fine Arts, Houston.
ROBERT S. MILLER has served as a director of Waste Management since May
1997. He was elected Chairman of the Board and named Acting Chief Executive
Officer of Waste Management in October 1997. On March 10, 1998, Mr. Miller was
named Chief Executive Officer of Waste Management. Mr. Miller is also serving as
Vice Chairman of Morrison Knudsen Corporation, an engineering and construction
firm. He served as Chief Executive Officer of Federal Mogul Corporation, an
automotive parts manufacturing firm, from September until November 1996 and as
Chairman of Morrision Knudsen Corporation from April 1995 until September 1996.
In addition, since 1993 he has served as Vice President and Treasurer of Moore
Mill and Lumber, a privately-held forest products firm, and from 1992 to 1993,
he served as Senior Partner of James D. Wolfensohn, Inc., an investment banking
firm. From 1979 to 1992, Mr. Miller worked at Chrysler Corporation ("Chrysler"),
an automobile and truck manufacturing firm, rising to become Vice Chairman of
the Board after serving as Chrysler's Chief Financial Officer. Mr. Miller is a
director of Federal Mogul Corporation, Fluke Corporation, Morrison Knudsen
Corporation, Pope & Talbot, Inc., and Symantec Corporation.
PAUL M. MONTRONE has served as a director of Waste Management since January
1997. Mr. Montrone has been Chairman of the Board since January 1998 and
President, Chief Executive Officer and a director since December 1991, of Fisher
Scientific International, Inc., a distributor of laboratory equipment and
supplies. Since May 1995, Mr. Montrone has served as Chairman of the General
Chemical Group, Inc., a manufacturer and distributor of chemicals ("General
Chemical") and from prior to 1992 to May 1995 as President and a director of
General Chemical. He also served as Vice Chairman of the Board of Abex, Inc., a
designer and manufacturer of engineered components for aerospace, defense,
industrial and commercial markets, or its predecessors, from 1992 to 1995. Mr.
Montrone was a director of WTI or a predecessor thereof from prior to 1989 until
January 1997.
JOHN C. POPE has served as a director of Waste Management since November
1997. Since January 1996, he has been Chairman of the Board of MotivePower
Industries, Inc., a manufacturer and remanufacturer of locomotives and
locomotive components. Mr. Pope served as President and Chief Operating Officer
of
50
<PAGE>
United Airlines and its parent corporation, UAL Corporation, form April 1992 to
July 1994. Prior thereto he served as Vice Chairman of both companies beginning
in November 1990, and as Executive Vice President, Marketing and Finance
beginning in October 1990, as Executive Vice President, Marketing and Planning
from May 1989 to September 1990 and as Chief Financial Officer beginning in
January 1988. Mr. Pope is also a director of Federal-Mogul Corporation, Wallace
Computer Services, Inc., Medaphis Corporation, MotivePower Industries, Inc.,
Lamalie Associates, Inc. and Dollar Thrifty Automotive Group, Inc.
RODNEY R. PROTO has been President, Chief Operating Officer and a director
of USA Waste since joining USA Waste in August 1996. From February 1992 to
August 1996, he was President, Chief Operating Officer and a director of
Sanifill. Before joining Sanifill, Mr. Proto was employed by Browning-Ferris
Industries, Inc. ("BFI") for 12 years where he served, among other positions, as
President of Browning-Ferris Industries Europe, Inc. from 1987 through 1991 and
Chairman of BFI Overseas from 1985 to 1987.
STEVEN G. ROTHMEIER has served as a director of Waste Management since March
1997 and has been Chairman and Chief Executive Officer of Great Northern
Capital, a private investment management, consulting and merchant banking firm,
since March 1993. From November 1989 until March 1993, he was President of IAI
Capital Group, a venture capital and merchant banking firm. For more than ten
years prior thereto, he served Northwest Airlines, Inc. or its parent
corporation, NWA, Inc., in various executive capacities, including Chairman and
Chief Executive Officer from 1986 to 1989. Mr. Rothmeier is also a director of
Honeywell, Inc. Department 56, Inc., EW Blanch Holdings, Inc. and Precision
Castparts Corp.
RALPH V. WHITWORTH is a principal and managing member of Relational
Investors LLC, a private investment company. He is also a partner in Batchelder
& Partners, Inc., a financial advisory and investment-banking firm based in La
Jolla, California. From 1988 until 1996, Mr. Whitworth was president of
Whitworth and Associates, a corporate advisory firm. Mr. Whitworth has served as
Chairman of the Board of Directors of Apria Healthcare Group Inc. since April
28, 1998 and as a director of Apria Healthcare Group Inc. since January 1998 and
is a director of CD Radio, Inc. and Wilshire Technologies, Inc.
JEROME B. YORK has served as a director of USA Waste since 1997 and has been
Vice Chairman of Tracinda Corporation since September 1995. From 1993 to 1995,
he was Senior Vice President and Chief Financial Officer of IBM Corporation and
was elected to the Board of Directors of IBM in January 1995. From 1979 to 1993,
Mr. York served in various management positions with Chrysler, including
Executive Vice President--Finance and Chief Financial Officer, and he was a
director of Chrysler in 1992 and 1993. Mr. York also serves as a director of MGM
Grand, Inc., Metro-Goldwyn-Mayer, Inc. and Apple Computer, Inc.
As of the Effective Time, Robert S. Miller, who is currently Chairman and
Chief Executive Officer of Waste Management, will be elected to a 12-month term
as non-executive Chairman of the New Waste Management Board; John E. Drury, who
is currently Chairman and Chief Executive Officer of USA Waste, will remain
Chief Executive Officer of New Waste Management; Rodney R. Proto, who is
currently President and Chief Operating Officer of USA Waste, is expected to
remain President and Chief Operating Officer of New Waste Management; and Earl
E. DeFrates, who is currently the Executive Vice President and Chief Financial
Officer of USA Waste, is expected to remain the Executive Vice President and
Chief Financial Officer of New Waste Management. Following expiration of Mr.
Miller's term as non-executive Chairman of the New Waste Management Board, Mr.
Drury will become the Chairman of the New Waste Management Board. Roderick M.
Hills is expected to become the Chairman of the Audit Committee of the New Waste
Management Board and Jerome B. York is expected to become the Chairman of the
Special Integration Committee of the New Waste Management Board.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the Merger to holders of Waste Management Common Stock who
hold such stock as a capital asset. 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, holders who acquired Waste Management Common Stock pursuant
to the exercise of an employee stock option or right or otherwise as
compensation, and holders who hold Waste Management 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 WASTE MANAGEMENT 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 USA Waste of an opinion of counsel from Shearman & Sterling, and
the receipt by Waste Management of an opinion of counsel from Skadden, Arps,
Slate, Meagher & Flom (Illinois) (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 U.S. federal income tax consequences of the Merger can be
summarized as follows:
- No gain or loss will be recognized by USA Waste, Dome Merger Subsidiary or
Waste Management as a result of the Merger;
- No gain or loss will be recognized by the holders of Waste Management
Common Stock who exchange all of their Waste Management Common Stock
solely for USA Waste Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share interest in USA
Waste Common Stock);
- The aggregate tax basis of the USA Waste Common Stock received by holders
of Waste Management Common Stock who exchange all of their Waste
Management Common Stock solely for USA Waste Common Stock pursuant to the
Merger will be the same as the aggregate tax basis of the Waste Management
Common Stock surrendered in exchange therefor (reduced by any amount of
tax basis allocable to a fractional share interest in USA Waste Common
Stock for which cash is received); and
- The holding period of a share of USA Waste Common Stock received in the
Merger will include the holder's holding period for the Waste Management
Common Stock surrendered in exchange therefor.
Each of Shearman & Sterling and Skadden, Arps, Slate, Meagher & Flom
(Illinois) will render its respective Tax Opinion on the basis of facts,
representations and assumptions set forth or referred to in such opinion which
are consistent with the state of facts existing at the Effective Time. In
rendering its Tax Opinion, each such counsel may require and rely upon
representations and covenants including those contained in certificates of
officers of USA Waste, Dome Merger Subsidiary, Waste Management and others,
reasonably satisfactory in form and substance to such counsel. The Tax Opinions
are not 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
such conclusion or that a court will not sustain such challenge.
52
<PAGE>
Cash received by a holder of Waste Management Common Stock in lieu of a
fractional share interest in USA Waste Common Stock will be treated as received
in disposition of such fractional share interest, and a Waste Management
stockholder should generally recognize capital gain or loss for U.S. federal
income tax purposes measured by the difference between the amount of cash
received and the portion of the tax basis of the share of Waste Management
Common Stock allocable to such 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, (ii) 28% for capital assets held for more than one year but
not more than 18 months and (iii) 20% for capital assets held for more than 18
months.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. USA Waste has been advised by Coopers &
Lybrand L.L.P. ("Coopers & Lybrand"), and Waste Management has been advised by
Arthur Andersen LLP ("Arthur Andersen"), that each believes the Merger will
qualify as a pooling of interests under generally accepted accounting
principles. Under this method of accounting, the recorded assets and liabilities
of USA Waste and Waste Management will be carried forward to New Waste
Management at their recorded amounts, the operating results of the combined
company will include the operating results of USA Waste and Waste Management for
the entire fiscal year in which the Merger occurs and the reported operating
results of the separate companies for prior periods will be combined and
restated as the operating results of the combined company.
It is a condition to the Merger that USA Waste and Waste Management shall
have received letters from Coopers & Lybrand and Arthur Andersen regarding their
respective concurrence with the conclusions of the respective managements of USA
Waste and Waste Management as to the appropriateness of pooling of interests
accounting, under Accounting Principles Board Opinion No. 16, for the Merger. In
order to permit the Merger to qualify as a pooling of interests, Waste
Management has agreed in the Merger Agreement to complete a public offering of
shares of Waste Management Common Stock to reverse certain share repurchases
effected by Waste Management, and it is currently expected that Waste Management
will issue approximately 20 million shares to do so. The Waste Management Board
has also amended certain stock option plans that entitle option holders, for a
one-year period following the occurrence of a "change in control", such as the
Merger, to sell their options to New Waste Management for cash. The amendments
provide that payment for such options may, in the discretion of the committee of
the Board of Directors of New Waste Management administering such plans, be made
in shares of New Waste Management Common Stock rather than cash. In addition,
Waste Management agreed that it would cooperate with USA Waste to conduct one or
more registered exchange offers to exchange outstanding Waste Management stock
options for shares of USA Waste Common Stock as of the Effective Time, although
USA Waste is not required to conduct any such exchange offer. See "The Merger
Agreement -- Conditions to the Merger".
REGULATORY APPROVALS
HART-SCOTT-RODINO. The FTC and the Antitrust Division of 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 USA Waste or Waste Management 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 March 24, 1998, USA Waste and Waste Management filed Pre-Merger
Notification and Report Forms with the FTC and the DOJ under the HSR Act. The
HSR Act, and the rules and regulations thereunder, provide that certain merger
transactions (including the Merger) may not be consummated
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until required information and materials have been furnished to the DOJ and the
FTC and certain waiting periods have expired or been terminated. On April 23,
1998 each of USA Waste and Waste Management received a second request with
respect to the Merger. The time period for the DOJ to review the Merger will be
terminate 20 days following substantial compliance by both USA Waste and Waste
Management 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 subject to the expiration or termination of all applicable waiting
periods under the HSR Act and no action having been instituted by the DOJ or the
FTC that is not withdrawn or terminated prior to the Effective Time.
OTHER. Consummation of the Merger is conditioned upon all 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 at the Effective Time, except where the failure to obtain the
same would not have any effect that is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of New Waste Management and its subsidiaries, taken as a
whole, following the Effective Time.
FEDERAL SECURITIES LAWS CONSEQUENCES
All shares of USA Waste Common Stock received by Waste Management
stockholders in the Merger will be freely transferable, except that shares of
USA Waste Common Stock received by persons who are deemed to be affiliates of
Waste Management 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 (or Rule 144 promulgated under the Securities Act in the case of such
persons who become affiliates of New 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 Waste Management or
New Waste Management are those individuals or entities that control, are
controlled by, or are under common control with, such party and generally
include executive officers and directors of such party as well as certain
principal stockholders of such party. The Merger Agreement requires Waste
Management to use its best efforts to cause each of its affiliates to execute a
written agreement to the effect that such person will not offer or sell or
otherwise dispose of any of the shares of USA Waste Common Stock issued to such
person in or pursuant to the Merger except in compliance with the Securities Act
and the rules and regulations promulgated by the Commission thereunder. This
Joint Proxy Statement/Prospectus does not cover any resales of USA Waste Common
Stock received by affiliates of Waste Management in the Merger.
STOCK EXCHANGE QUOTATION
It is a condition to the Merger that the shares of USA Waste 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 USA Waste Common Stock to be issued in the Merger on the NYSE.
NO APPRAISAL RIGHTS
Neither holders of Waste Management Common Stock nor USA Waste Common Stock
are entitled to appraisal rights under Section 262 of the Delaware General
Corporation Law (the "DGCL") in connection with the Merger because Waste
Management Common Stock was listed on the NYSE on the Waste Management Record
Date and the shares of USA Waste Common Stock to be issued pursuant to the
Merger will be listed on the NYSE at the Effective Time. Holders of USA Waste
Common Stock are not entitled to appraisal rights under Section 262 of the DGCL
in connection with the Merger because USA Waste is not a constituent corporation
in the Merger.
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CERTAIN LEGAL PROCEEDINGS
On March 12, 1998, a stockholder of Waste Management filed a purported class
action suit in the Chancery Court of the State of Delaware in New Castle County
against Waste Management and certain of its current and former directors. The
complaint alleges, among other things, that (i) the Merger is the product of
unfair dealing and the price to be paid to members of the purported class for
their Waste Management Common Stock is unfair and inadequate, (ii) the Merger
will prevent members of the purported class from receiving their fair portion of
the value of Waste Management's assets and business and from obtaining the real
value of their equity ownership of Waste Management, (iii) defendants breached
their fiduciary duties owed to the members of the purported class by putting
their personal interests ahead of the interests of Waste Management's public
stockholders and (iv) the members of the class action will suffer irreparable
damage unless the defendants are enjoined from breaching their fiduciary duties.
The complaint seeks equitable relief that would enjoin or rescind the Merger, as
the case may be, and monetary damages from the defendants for unlawfully gained
profits and special benefits. Waste Management believes the suit to be without
merit and intends to contest it vigorously.
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THE MERGER AGREEMENT
GENERAL
The Merger Agreement provides that 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"), with Waste Management continuing as the
surviving corporation of the Merger (the "Surviving Corporation") as a
subsidiary of New Waste Management.
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Annex A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Merger Agreement. Stockholders of
USA Waste and Waste Management are urged to read the Merger Agreement in its
entirety for a more complete description of the terms and conditions of the
Merger.
EXCHANGE OF SHARES
Upon consummation of the Merger, each issued and outstanding share of Waste
Management Common Stock (other than shares owned by Waste Management as treasury
stock or by USA Waste, Dome Merger Subsidiary, any other wholly-owned subsidiary
of USA Waste or any wholly-owned subsidiary of Waste Management, all of which
will be canceled) will be converted into the right to receive 0.725 of a share
of USA Waste Common Stock. Based upon the number of outstanding shares of USA
Waste Common Stock and Waste Management Common Stock as of June 9, 1998, and
assuming the issuance by Waste Management of 20 million shares of Waste
Management Common Stock prior to the Merger, the stockholders of Waste
Management immediately prior to the consummation of the Merger will own
approximately 60% of the outstanding shares of common stock of the combined
company immediately following consummation of the Merger.
No fractional shares of USA Waste Common Stock will be issued to any Waste
Management stockholder upon surrender of certificates previously representing
Waste Management Common Stock. Promptly after the Effective Time, a bank or
trust company to be designated by USA Waste and reasonably acceptable to Waste
Management (the "Exchange Agent") will determine the excess of (i) the number of
whole shares of USA Waste Common Stock delivered to the Exchange Agent by USA
Waste over (ii) the aggregate number of whole shares of USA Waste Common Stock
to be distributed to former holders of Waste Management Common Stock (such
excess being the "Excess Shares"). The Exchange Agent will sell the Excess
Shares on the NYSE in accordance with the terms of the Merger Agreement and will
hold the proceeds in trust for the former holders of Waste Management Common
Stock. The Exchange Agent shall make available to each former holder of Waste
Management Common Stock the amount, if any, determined by multiplying the amount
comprising the aggregate net proceeds in trust by a fraction the numerator of
which is the fractional share interest to which such holder would otherwise be
entitled and the denominator of which is the aggregate amount of fractional
share interests to which all former holders of Waste Management Common Stock are
entitled. Alternatively, USA Waste may elect prior to the Effective Time, for
each fractional share that would otherwise be issued, to make available to such
stockholders an amount in cash equal to the product obtained by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the closing price for a share of New Waste Management Common Stock on the NYSE
Composite Transaction Tape on the first business day immediately following the
Effective Time.
No dividend or distribution with respect to New 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
New Waste Management.
Promptly after the Effective Time, the Exchange Agent will mail transmittal
forms and exchange instructions to each holder of record of Waste Management
Common Stock to be used to surrender and
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exchange certificates formerly evidencing shares of Waste Management Common
Stock for certificates evidencing the shares of New Waste Management Common
Stock to which such holder has become entitled. After receipt of such
transmittal forms, each holder of certificates formerly representing Waste
Management 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 New Waste Management
Common Stock to which such holder is entitled, any cash which may be payable in
lieu of a fractional share of New Waste Management Common Stock and any
dividends or other distributions with respect to New Waste Management Common
Stock with a record date after the Effective Time declared or made after the
Effective Time. WASTE MANAGEMENT STOCKHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM. CERTIFICATES CURRENTLY
REPRESENTING SHARES OF USA WASTE COMMON STOCK WILL, AS OF THE EFFECTIVE TIME,
AUTOMATICALLY REPRESENT SHARES OF NEW WASTE MANAGEMENT COMMON STOCK; USA WASTE
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES.
After the Effective Time, each certificate formerly representing Waste
Management 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 New 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 New Waste Management Common Stock and any dividend or other
distribution with respect to New 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 New 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 New Waste Management Common
Stock, will be paid without interest.
Each share of common stock, par value $0.01 per share, of Dome Merger
Subsidiary issued and outstanding immediately prior to the Effective Time will
be converted into one share of common stock of the Surviving Corporation.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of USA Waste and Waste Management relating to, among other things,
(i) due organization, valid existence and good standing of each of USA Waste,
Waste Management and each of their respective subsidiaries and certain similar
corporate matters; (ii) the capitalization of each of USA Waste and Waste
Management; (iii) the authorization, execution, delivery and enforceability of
the Merger Agreement, the consummation of the transactions contemplated by the
Merger Agreement and related matters; (iv) conflicts under charters or bylaws,
required consents or approvals and violations of any instruments or law caused
by the Merger; (v) possession of governmental permits and compliance with laws;
(vi) employee benefit plans and labor matters; (vii) accounting and tax matters
relating to the Merger; (viii) material contracts and debt instruments; (ix)
litigation; (x) environmental matters; (xi) past tax compliance; (xii)
individuals deemed "pooling affiliates"; (xiii) non-competition agreements;
(xiv) opinions of financial advisors; (xv) brokers; (xvi) insurance; and, the
case of USA Waste, (xvii) interim operations of Dome Merger Subsidiary.
The Merger Agreement also contains customary representations and warranties
of USA Waste related to (i) various documents and financial statements it has
filed with the Commission and the accuracy of information contained therein and
(ii) the absence of certain material adverse changes or events since January 1,
1997, the beginning of the period following the latest period covered by USA
Waste's Annual Report on Form 10-K for the year ended December 31, 1996. As a
result of a comprehensive review begun in the third quarter of 1997, Waste
Management determined that certain items or expenses were incorrectly reported
in previously issued financial statements that had been filed with the
Commission. Waste Management has accordingly restated its financial results for
the years 1992 through 1996, and restated financial statements were filed with
the Commission as part of the Waste Management 1997
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Form 10-K. At the time the Merger Agreement was signed, Waste Management had not
filed with the Commission the Waste Management 1997 Form 10-K and, accordingly,
did not make customary representations and warranties related to the accuracy of
information contained in its documents and financial statements filed with the
Commission prior to the date of the Merger Agreement. Similarly, for purposes of
determining whether there has been a material adverse change or event with
respect to the assets, liabilities, financial condition or results of operations
of Waste Management, actual amounts as at any date of determination (or for any
period of determination) will be compared to corresponding amounts in Waste
Management's 1998 business plan provided to USA Waste prior to execution of the
Merger Agreement. Such business plan contemplates 1998 net income of $408
million, 1998 earnings per share of $0.90 (based on 455 million outstanding
shares of Waste Management Common Stock) and total liabilities and stockholders'
equity at December 31, 1998 of $13.786 billion.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, each of USA Waste and Waste Management has
agreed that, during the period from the date of the Merger Agreement until the
Effective Time, except as otherwise consented to in writing by the other party
or as contemplated by the Merger Agreement, it and each of its respective
subsidiaries (other than, in the case of Waste Management, WM International)
will carry on its business in the ordinary course consistent with past practice
and use reasonable efforts to keep available the services of their current
officers and other key employees and to preserve current business relationships
in order to preserve intact its business organization.
In addition, USA Waste and Waste Management have agreed that, among other
things and subject to certain exceptions, neither it nor any of its subsidiaries
(other than WM International) may:
- amend its certificate of incorporation or bylaws;
- issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of any shares
of its capital stock or securities convertible into shares of its capital
stock or any of its property or assets, subject to certain exceptions;
- acquire any interest in any businesses for consideration in excess of an
aggregate of $500 million, in the case of Waste Management, and $1.2
billion, in the case of USA Waste (respectively, "Permitted
Acquisitions");
- incur indebtedness for money borrowed other than in the ordinary course of
business and to finance Permitted Acquisitions;
- make or authorize any capital expenditures other than in the ordinary
course of business consistent with past practice and that are not, in the
aggregate, in excess of $500 million plus 15% of the aggregate
consideration paid for in Permitted Acquisitions, in the case of USA
Waste, and in excess of $1.2 billion plus 15% of the aggregate
consideration paid for in Permitted Acquisitions, in the case of Waste
Management;
- declare, set aside, make or pay any dividend or other distributions in
respect of any of its capital stock except for dividends paid by a
subsidiary to its respective parent and, in the case of Waste Management,
for regular quarterly dividends not in excess of $0.17 per share of Waste
Management Common Stock;
- reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any capital stock;
- take any action with respect to accounting policies or procedures other
than those in the ordinary course of business, as required by GAAP or may
be required by the Commission; or
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- authorize or enter into any formal or informal agreement or otherwise make
any commitment to any of the foregoing.
In addition, Waste Management has agreed that, during the period from the
date of the Merger Agreement until the Effective Time, except as otherwise
consented to in writing by USA Waste or as specifically contemplated in the
Merger Agreement, Waste Management and each of its respective subsidiaries
(other than WM International) will not (i) terminate or modify any material
contract; (ii) increase the compensation payable to its officers or employees
(except for increases to non-executive officers and employees consistent with
past practices), grant severance or termination pay to, or enter into employment
or severance agreements with, or establish, adopt, enter into or amend any plan
for the benefit of, its directors, officers or employees, except to the extent
required by applicable law or the terms of a collective bargaining agreement; or
(iii) make any tax election or settle or compromise any material tax liability
except those made in the ordinary course of business or those for which specific
reserves have been recorded on Waste Management's December 31, 1996 balance
sheet.
Waste Management has agreed to use all reasonable efforts to cause WM
International to comply with the covenants described above that are applicable
to Waste Management's other subsidiaries.
Pursuant to the Merger Agreement, USA Waste and Waste Management have each
agreed to coordinate and cooperate in connection with (i) preparing the USA
Waste Registration Statement and this Joint Proxy Statement/Prospectus, (ii)
determining whether any action by or in respect of, or filing with, any
governmental entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts in connection
with the consummation of the Merger and (iii) seeking any such actions,
consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the USA Waste Registration
Statement and this Joint Proxy Statement/Prospectus and timely seeking to obtain
any such actions, consents, approvals or waivers.
GOVERNMENTAL CONSENTS
USA Waste and Waste Management have agreed in the Merger Agreement to use
all reasonable efforts to take all actions necessary or advisable to consummate
the Merger, to obtain required governmental consents, approvals, authorization
or orders, and to obtain consents needed so that the Merger will not constitute
a change in control (or similar event) which constitutes a default under any
material contract to which either company is a party.
In addition, each of USA Waste and Waste Management agreed to use its
commercially reasonable efforts to obtain required governmental clearances, to
respond to government inquiries for information and to contest and resist any
action that restricts, prevents or prohibits the completion of the Merger. Each
company agreed to deliver a proffer of its willingness to (a) sell or otherwise
dispose of, or hold separate and agree to sell or otherwise dispose of, such of
its assets, categories of assets or business and (b) terminate such existing
relationships and contractual rights and obligations if such action is necessary
or reasonably advisable to avoid or prevent any action by a governmental
antitrust entity which would restrain, enjoin or otherwise prevent or materially
delay the closing of the Merger; PROVIDED, HOWEVER, that neither company will be
required to take such actions if they would be reasonably likely, individually
or in the aggregate, to have a material adverse effect on the combined company.
Each company also agreed that it would, in the event that a 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
Merger unlawful or that would prevent or delay consummation of the Merger, take
all steps necessary to vacate, modify or suspend such injunction or order so as
to permit consummation of the Merger in the time contemplated by the Merger
Agreement. USA Waste will coordinate and be the principal spokesperson in
connection with any proceedings or negotiations with a governmental entity
relating hereto, PROVIDED that it will afford Waste Management a reasonable
opportunity to participate therein.
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NO SOLICITATION
The Merger Agreement provides that USA Waste and Waste Management will not,
directly or indirectly, and will instruct its respective officers, directors,
employees, subsidiaries, agents or advisors or other representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it), not to, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing nonpublic information), or take any other action
knowingly to facilitate, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) that
constitutes, or may reasonably be expected to lead to, any Competing Transaction
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of the officers, directors or employees of such party or
any of its subsidiaries, or any investment banker, financial advisor, attorney,
accountant or other representative retained by such party or any of such party's
subsidiaries, to take any such action; PROVIDED, HOWEVER, that neither the USA
Waste Board nor the Waste Management Board is prohibited from furnishing
information to, or entering into discussions or negotiations with, any person in
connection with an unsolicited (from the date of the Merger Agreement) proposal
by such person to acquire USA Waste or Waste Management, as the case may be,
pursuant to a merger, consolidation, share exchange, tender offer, exchange
offer, business combination or other similar transaction or to acquire all or
substantially all of the assets of such party or any of its subsidiaries, if,
and only to the extent that, (i) such board of directors, after consultation
with outside legal counsel, determines in good faith that such action is
required for such board of directors to comply with its duties to its
stockholders imposed by applicable law and (ii) prior to furnishing such
information to, or entering into discussions or negotiations with, such person,
such party obtains from such person an executed confidentiality agreement on
terms no less favorable to USA Waste or Waste Management, as the case may be,
than those contained in the Confidentiality Agreement, dated January 26, 1998,
between USA Waste and Waste Management. USA Waste and Waste Management are each
required to notify the other party promptly if any proposal or offer, or any
inquiry or contact with any person with respect thereto, regarding a Competing
Transaction is made.
A "Competing Transaction" is defined in the Merger Agreement as any of the
following involving USA Waste or Waste Management, as the case may be (other
than the Merger contemplated by the Merger Agreement): (i) a merger,
consolidation, share exchange, business combination or other similar
transaction, (ii) any sale, lease, exchange, transfer or other disposition of
25% or more of the assets of such party and its subsidiaries, taken as a whole,
or of assets of such party and its subsidiaries generating 25% or more of such
party's revenues or operating income, or (iii) a tender offer or exchange offer
for 25% or more of the outstanding voting securities of such party.
DIRECTORS AND CHIEF EXECUTIVE OFFICER OF THE COMBINED COMPANY
The Merger Agreement provides that the USA Waste Board shall cause the USA
Waste Board, immediately following the Effective Time, to be composed of 14
members, with seven of the initial members to be designated by Waste Management
and seven of the initial members to be designated by USA Waste. The USA Waste
Board agreed to cause Mr. Robert S. Miller to be named as the non-executive
Chairman of the New Waste Management Board for a 12-month term to begin
immediately following the Effective Time. Following the expiration of such term,
Mr. John E. Drury will be named as the Chairman of the New Waste Management
Board. Mr. Drury, the current Chief Executive Officer of USA Waste, will remain
as Chief Executive Officer of New Waste Management following the Effective Time.
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POOLING MATTERS
Each of USA Waste and Waste Management agreed to take all reasonable actions
necessary to cause the Merger to be characterized as a pooling of interests for
accounting purposes, including the following actions:
- Following the effective time of the merger of WMI Merger Sub, Inc. ("WMI
Merger Sub"), a wholly-owned subsidiary of Waste Management, with and into
WTI, Waste Management caused certain WTI benefits plans to be amended so
as to provide that Waste Management may satisfy any obligations it may
have to repurchase a participant's exercisable but unexercised options
under such stock plans by issuing to such participant shares of Waste
Management Common Stock, with a fair market value equal to the cash that
would otherwise have been payable thereunder.
- At USA Waste's request, Waste Management will cooperate with and assist
USA Waste in conducting one or more registered exchange offers to exchange
outstanding Waste Management stock options for shares of USA Waste Common
Stock as of the Effective Time. Waste Management has agreed to furnish all
information concerning Waste Management as USA Waste may reasonably
request in connection with such exchange offer(s), including as may be
necessary to comply with the applicable requirements of the Exchange Act,
the Securities Act, the NYSE and the DGCL.
- Waste Management will file with the Commission a registration statement on
Form S-3 or other applicable form (the "S-3 Registration Statement") to
reverse certain share repurchases effected by Waste Management; PROVIDED,
HOWEVER, that the terms and conditions of any such disposition must be
reasonably acceptable to USA Waste. USA Waste will cooperate with Waste
Management in fulfilling the requirements of the S-3 Registration
Statement. It is expected that Waste Management will issue and sell
approximately 20 million shares of Waste Management Common Stock pursuant
to the S-3 Registration Statement.
STOCK OPTIONS AND EMPLOYEE BENEFITS
At the Effective Time, each then outstanding option or warrant (a "Waste
Management Stock Option") to purchase shares of Waste Management Common Stock
will be assumed by USA Waste and converted into an option to acquire, on the
same terms and conditions as were applicable under such Waste Management Stock
Option, the number of shares of USA Waste Common Stock (rounded down to the
nearest whole number) equal to the product of (x) the number of shares of Waste
Management Common Stock subject to the original option or warrant and (y) the
Exchange Ratio. The exercise price per share of USA Waste Common Stock under the
converted option or warrant will be equal to (rounded up to the nearest whole
cent) (x) the exercise price per share of Waste Management Common Stock under
the original option or warrant divided by (y) the Exchange Ratio. As of March
31, 1998, options to acquire 27,353,598 shares of Waste Management Common Stock
were outstanding. All outstanding Waste Management Stock Options which have not
yet become exercisable will become exercisable in full upon the closing of the
Merger (other than those granted on or after March 10, 1998, which have been
granted subject to the condition that the recipient waive such immediate
exercisability). Prior to the Effective Time, USA Waste may conduct one or more
registered exchange offers to exchange outstanding Waste Management Stock
Options for shares of USA Waste Common Stock as of the Effective Time, although
it is not required to conduct any such exchange offer. See "--Pooling Matters".
The Waste Management Board has amended certain of Waste Management's option
plans that entitle option holders, for a one-year period following the
occurrence of a "change in control", such as the Merger, to sell their options
to New Waste Management for cash. The amendments provide that payment for such
options may, in the discretion of the committee of the New Waste Management
Board administering such plans, be made in shares of New Waste Management Common
Stock rather than cash.
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USA Waste agreed to reserve for issuance a sufficient number of shares of
USA Waste Common Stock for delivery upon exercise of the Waste Management Stock
Options described above. At or prior to the Effective Time, USA Waste will file
a registration statement with respect to the shares of USA Waste Common Stock
subject to such options and will use its best efforts to maintain the
effectiveness of such registration statement for so long as such options remain
outstanding.
Prior to the Effective Time, Waste Management will terminate the SERP, as of
or prior to the Effective Time. No further benefits will accrue under the SERP
after its termination (except that participants will be credited with the
maximum number of additional years of benefit service to which the participant
would be entitled under his or her employment agreement if his or her employment
terminated upon the termination of the SERP under circumstances which would
entitle him or her to severance or similar benefits under such employment
agreement) and all benefits thereunder will be fully vested and paid out on a
present value basis, using the actuarial assumptions applicable to lump sum
payments under Waste Management's qualified defined benefit plan, effective as
of the date of termination of the SERP.
Following the Effective Time, USA Waste will arrange for each employee of
Waste Management or any of its subsidiaries to participate in counterpart USA
Waste employee benefit plans, programs and arrangements in accordance with the
eligibility requirements thereof, and will cause the Surviving Corporation to
honor employee benefit obligations to current and former employees and directors
of Waste Management under certain Waste Management benefit plans. Participants
in counterpart USA Waste employee benefit plans will receive full credit for
years of service with Waste Management or any subsidiary of Waste Management
prior to the Effective Time for all purposes for which such service was
recognized under the Waste Management employee benefit plans. To the extent that
New Waste Management elects to terminate after the Effective Time any employee
pension benefit plan maintained by Waste Management or any subsidiary of Waste
Management which is a defined benefit plan, then all accrued benefits thereunder
will be fully vested and the accrued benefits will be paid as promptly as
practicable to participants thereunder who so elect in a lump sum payment.
DIRECTOR AND OFFICER INDEMNIFICATION
The indemnification obligations set forth in the Waste Management Charter
and Bylaws will survive the Merger and, prior to the Effective Time, USA Waste
will amend the Certificate of Incorporation and Bylaws of Dome Merger Subsidiary
to reflect such provisions. Such indemnification provisions will not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of the
individuals who on or prior to the Effective Time were directors, officers,
employees or agents of Waste Management or any subsidiary of Waste Management.
Waste Management will, to the fullest extent permitted under applicable law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation will, to the
fullest extent permitted under applicable law, indemnify and hold harmless, each
present and former director, officer, trustee, fiduciary, employee or agent of
Waste Management and each subsidiary of Waste Management and each such person
who served at the request of Waste Management or any subsidiary of Waste
Management as a director, officer, trustee, partner, fiduciary, employee or
agent of another corporation or enterprise against all costs and expenses,
judgments, fines, losses, claims, damages, liabilities and settlement amounts
paid in connection with any claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), arising out of or
pertaining to any action or omission in their capacity as an officer or
director, in each case occurring before the Effective Time (including the
transactions contemplated by the Merger Agreement).
For a period of six years from the Effective Time, the Surviving Corporation
will provide (to the extent available in the market) to Waste Management's
current directors and officers liability insurance protection of the same kind
and scope as that provided by Waste Management's directors' and officers'
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<PAGE>
liability insurance policies, PROVIDED, HOWEVER, that in no event will the
Surviving Corporation be required to expend more than 200% of the current amount
expended by Waste Management to maintain or procure insurance coverage. If the
Surviving Corporation is unable to maintain or obtain such insurance, it shall
use its best efforts to obtain as much comparable insurance as is available for
the maximum amount required to be expended under the terms of the Merger
Agreement.
New Waste Management will guarantee the indemnification obligations of the
Surviving Corporation described above, as well as under all director and officer
indemnification agreements entered into by Waste Management and its
subsidiaries.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE MERGER. The
respective obligations of USA Waste, Waste Management and Dome Merger Subsidiary
to effect the Merger are subject to the satisfaction or waiver of the following
conditions on or prior to the closing date of the Merger (the "Closing Date"):
- EFFECTIVE REGISTRATION STATEMENT. The USA Waste Registration Statement
having become effective and not being the subject of a stop order or
proceedings seeking a stop order.
- STOCKHOLDER APPROVAL. The Charter Proposal and the Share Issuance Proposal
having been duly approved by the stockholders of USA Waste and the Merger
Agreement having been duly approved and adopted by the stockholders of
Waste Management.
- NO PROCEEDINGS. No governmental order, writ, injunction or decree being in
effect that would make the Merger illegal or otherwise prohibits the
consummation of the Merger.
- HSR ACT. The waiting period (and any extension thereof) applicable to the
Merger under the HSR Act and other similar laws having expired or been
terminated.
- OTHER CONSENTS AND APPROVALS. All consents, approvals and authorizations
legally required to consummate the Merger having been obtained from all
governmental entities except where the failure to obtain any such consent,
approval or authorization would not have a material adverse effect on the
business of New Waste Management after the Effective Time.
- ACCOUNTANTS' LETTERS. Each of Coopers & Lybrand and Arthur Andersen, as
the independent public accountants of USA Waste and Waste Management,
respectively, having issued "comfort" letters as of the date the USA Waste
Registration Statement becomes effective and as of the Effective Time and
pooling of interests letters.
- STOCK EXCHANGE LISTING. The shares of USA Waste Common Stock to be issued
in the Merger and upon the exercise of the Waste Management Stock Options
having been authorized for listing on the NYSE.
- DISPOSAL OF CERTAIN TREASURY SHARES. The S-3 Registration Statement having
been declared effective by the Commission and shares of Waste Management
Common Stock having been sold thereunder, as contemplated by the Merger
Agreement.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF WASTE MANAGEMENT. The
obligations of Waste Management to effect the Merger are subject to the
satisfaction or waiver of the following additional conditions:
- REPRESENTATIONS AND WARRANTIES TRUE. Each of the representations and
warranties of USA Waste set forth in the Merger Agreement being true and
correct in all material respects when made and on and as of the Effective
Time as if made on and as of such time, and Waste Management having
received a certificate signed by the Chairman or President and Chief
Financial Officer of USA Waste to such effect.
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<PAGE>
- COMPLIANCE WITH OBLIGATIONS. USA Waste having performed in all material
respects all of its material obligations required to be performed by it at
or prior to the Effective Time, and Waste Management having received a
certificate signed by the Chairman or President and Chief Financial
Officer of USA Waste to such effect.
- ABSENCE OF CERTAIN EVENTS. No events having occurred or being reasonably
likely to occur which, individually or in the aggregate, have had or could
reasonably be expected to have a material adverse effect on USA Waste.
- TAX OPINION. Waste Management having received a written legal opinion from
Skadden, Arps, Slate, Meagher & Flom (Illinois) to the effect that for
federal income tax purposes (i) the Merger will be treated as a tax-free
reorganization within the meaning of Section 368(a) of the Code, (ii) no
gain or loss will be recognized by USA Waste, Dome Merger Subsidiary or
Waste Management as a result of the Merger, (iii) no gain or loss will be
recognized by the Waste Management stockholders who exchange their Waste
Management Common Stock solely for USA Waste Common Stock pursuant to the
Merger (except with respect to cash received in lieu of a fractional share
interest) (see "The Merger--Certain Federal Income Tax Consequences").
- BOARD OF DIRECTORS. USA Waste having taken all action necessary to cause
seven designees of Waste Management to become members of the New Waste
Management Board, and Mr. Robert S. Miller to be elected Chairman of the
New Waste Management Board, in each case as of the Effective Time.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF USA WASTE. The obligations of
USA Waste to effect the Merger are subject to the satisfaction or waiver of the
following additional conditions:
- REPRESENTATIONS AND WARRANTIES TRUE. Each of the representations and
warranties of WMI set forth in the Merger Agreement being true and correct
in all material respects when made and on and as of the Effective Time as
if made on and as of such time, and USA Waste having received a
certificate signed by the Chairman or President and Chief Financial
Officer of Waste Management to such effect.
- COMPLIANCE WITH OBLIGATIONS. Waste Management having performed in all
material respects all of its material obligations required to be performed
by it at or prior to the Effective Time, and USA Waste having received a
certificate signed by the Chairman or President and Chief Financial
Officer of Waste Management to such effect.
- ABSENCE OF CERTAIN EVENTS. Except as contemplated by the Merger Agreement,
no events having occurred or being reasonably likely to occur which,
individually or in the aggregate, have had or could reasonably be expected
to have a material adverse effect on Waste Management; for purposes of
determining whether a material adverse effect has occurred on the assets,
liabilities, financial condition or results of operations of Waste
Management, actual amounts as at any date (or for any period of
determination will be compared, to the extent practicable, to the
corresponding amounts included in Waste Management's 1998 business plan
provided to USA Waste prior to the execution of the Merger Agreement.
- TAX OPINION. USA Waste having received a written legal opinion from
Shearman & Sterling to the effect that for federal income tax purposes (i)
the Merger will be treated as a tax-free reorganization within the meaning
of Section 368(a) of the Code, (ii) no gain or loss will be recognized by
USA Waste, Dome Merger Subsidiary or Waste Management as a result of the
Merger, (iii) no gain or loss will be recognized by the Waste Management
stockholders who exchange their Waste Management Common Stock solely for
USA Waste Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest) (see "The Merger--Certain
Federal Income Tax Consequences").
64
<PAGE>
TERMINATION OF THE MERGER AGREEMENT
Prior to the Effective Time, notwithstanding any requisite adoption of the
Merger Agreement, the Merger Agreement may be terminated by USA Waste and Waste
Management by mutual consent, or by either of USA Waste or Waste Management, if
(a) the Merger has not been consummated on or before October 31, 1998 (provided
that the party wishing to terminate shall not have prevented such consummation
by failing to fulfill any of its obligations under the Merger Agreement and that
such date may be extended by any party to the Merger Agreement to December 30,
1998 if the Merger has not been consummated as a result of (i) the failure to
obtain the requisite regulatory approvals or consents or (ii) the existence of
litigation or any governmental proceeding seeking to prevent or prohibit
consummation of the Merger), (b) any court of competent jurisdiction enters any
order, writ, injunction or decree preventing the consummation of the Merger and
such action is final and nonappealable, (c) the board of directors of the other
withdraws, modifies or changes its recommendation of the Merger Agreement,
recommends to its stockholders a Competing Transaction or fails to recommend
against a tender or exchange offer for 25% or more of its stock, (d) any of the
required approvals of the stockholders of either have not been obtained at the
Special Meetings (including any adjournments thereof), (e) the other has
breached any representation, warranty, covenant or agreement, or any
representation or warranty made by the other in the Merger Agreement becomes
untrue and such breach would prevent the conditions to closing summarized above
from being satisfied, and the breaching party fails or ceases to take reasonable
efforts to cure such breach, or (f) upon three business days' notice to the
other, its board of directors, following receipt of advice of outside counsel
that failure to so terminate would be inconsistent with its duties to
stockholders, in good faith has withdrawn, modified or changed its
recommendation to stockholders as to the matters to be voted on at its Special
Meeting and, prior thereto, a third party has made a public announcement with
respect to a Competing Transaction that is more favorable to its stockholders
that the Merger. In the event of any termination of the Merger Agreement by
either USA Waste or Waste Management as provided in the previous sentence, the
Merger Agreement will become void and there will be no liability or obligation
(with limited exceptions) on the part of USA Waste, Waste Management, Dome
Merger Subsidiary or their respective officers, directors, stockholders or
affiliates, except as provided below with respect to expense reimbursements and
termination fees.
TERMINATION FEES AND EXPENSES
TERMINATION FEE PAYABLE BY USA WASTE. The Merger Agreement obligates USA
Waste to pay to Waste Management $183 million if (i) USA Waste terminates the
Merger Agreement under clause (f) of the preceding paragraph, (ii) Waste
Management terminates the Merger Agreement under clause (c) of the preceding
paragraph and at the time of such termination, there exists a Competing
Transaction with respect to USA Waste or (iii) Waste Management terminates the
Merger Agreement under clause (d) of the preceding paragraph because of a
failure by USA Waste to obtain the requisite votes for the approval of the
Charter Proposal and the Share Issuance Proposal and (A) at the time of such
failure to obtain the requisite stockholder approvals there exists a Competing
Transaction with respect to USA Waste and (B) within 12 months thereafter, USA
Waste enters into a definitive agreement with respect to any Competing
Transaction that is subsequently consummated or any Competing Transaction shall
be consummated.
TERMINATION FEE PAYABLE BY WASTE MANAGEMENT. The Merger Agreement obligates
Waste Management to pay to USA Waste $275 million if (i) Waste Management
terminates the Merger Agreement under clause (f) of the second preceding
paragraph, (ii) USA Waste terminates the Merger Agreement under clause (c) of
the second preceding paragraph and at the time of such termination, there exists
a Competing Transaction with respect to Waste Management or (iii) USA Waste
terminates the Merger Agreement under clause (d) of the second preceding
paragraph because of a failure by Waste Management to obtain the requisite votes
for the adoption of the Merger Agreement and (A) at the time of such failure to
adopt the Merger Agreement there exists a Competing Transaction with respect to
Waste
65
<PAGE>
Management and (B) within 12 months thereafter, Waste Management enters into a
definitive agreement with respect to any Competing Transaction that is
subsequently consummated or any Competing Transaction shall be consummated.
EXPENSES. Except as set forth herein, all expenses incurred in connection
with the Merger Agreement and the Merger will be paid by the party incurring
such expenses, whether or not the Merger is consummated, except that USA Waste
and Waste Management each will pay one-half of all expenses incurred solely for
printing, filing and mailing the USA Waste Registration Statement and the Joint
Proxy Statement/Prospectus and all Commission and other regulatory filing fees
incurred in connection with the Registration Statement and the Joint Proxy
Statement, the fee required to be paid in connection with the HSR Act and the
printing, filing and mailing of the S-3 Registration Statement.
If either USA Waste or Waste Management terminates the Merger Agreement
because the other party has breached any representation, warranty, covenant or
agreement in the Merger Agreement or any representation or warranty made by the
other in the Merger Agreement becomes untrue and such breach would prevent the
conditions to closing summarized above from being satisfied, and the breaching
party fails or ceases to take reasonable efforts to cure such breach, then the
other party must pay up to $20 million of expenses of the terminating party
incurred in connection with pursuing the Merger.
AMENDMENT AND WAIVER
The Merger Agreement may be amended at any time by action taken or
authorized by the USA Waste Board and the Waste Management Board, PROVIDED,
HOWEVER, that after adoption of the Merger Agreement by the WMI stockholders no
amendment may be made except such amendments that have received the requisite
stockholder approval and such amendments as are permitted to be made without
stockholder approval under the DGCL.
At any time prior to the Effective Time, USA Waste and Waste Management may
extend the time for performance of the obligations or other acts of the other
parties to the Merger Agreement or may waive inaccuracies in the representations
or warranties contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement.
66
<PAGE>
THE COMPANIES
USA WASTE
BUSINESS. USA Waste is the third largest integrated solid waste management
company in North America, as measured by revenues for the 1997 fiscal year, and
currently serves, through its subsidiaries, the full spectrum of commercial,
industrial, municipal and residential customers in 48 states, the District of
Columbia, Canada and Puerto Rico. USA Waste's solid waste management services
include collection, transfer and disposal operations and, to a lesser extent,
recycling and certain other waste management services. At December 31, 1997, USA
Waste, through its subsidiaries, owned or operated an extensive network of
landfills, transfer stations and collection operations and had a diversified
customer base in excess of seven million with no single customer accounting for
more than 5% of USA Waste's operating revenues during 1997. USA Waste employed
approximately 17,700 people as of December 31, 1997. For the year ended December
31, 1997, approximately 62%, 10%, 24% and 4% of USA Waste's revenues were
attributable to collection, transfer, disposal and other waste management
services, respectively.
STOCK OWNERSHIP OF MANAGEMENT. The following table sets forth certain
information as of May 1, 1998 with respect to the beneficial ownership of USA
Waste Common Stock by (i) each director of USA Waste, (ii) certain executive
officers of USA Waste, including the Chief Executive Officer and the four other
most highly compensated executive officers of USA Waste who were serving as such
at December 31, 1997 and (iii) all current directors and executive officers of
USA Waste as a group. Except as otherwise indicated below, each of the entities
and persons named in the table has sole voting and investment power with respect
to all shares of USA Waste Common Stock beneficially owned.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES PERCENT OF NEW WASTE
SHARES OTHER OF USA WASTE USA WASTE MANAGEMENT
THAN OPTIONS OPTIONS COMMON STOCK COMMON STOCK COMMON STOCK
EXERCISABLE EXERCISABLE BENEFICIALLY OWNED BEFORE AFTER
BENEFICIAL OWNER WITHIN 60 DAYS WITHIN 60 DAYS (1) THE MERGER THE MERGER (2)
- --------------------------------- -------------- -------------- -------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
John E. Drury.................... 1,089,114 1,235,000 2,324,114 1.1% *
Rodney R. Proto.................. 422,099 300,500 722,599 * *
Ralph F. Cox..................... 8,500 28,000 36,500 * *
Richard J. Heckmann.............. 10,439 6,500 16,939 * *
Richard D. Kinder................ 2,000 0 2,000 * *
Larry J. Martin.................. 1,496,510 45,000 1,541,510 * *
William E. Moffett............... 0 13,165 13,165 * *
John G. Rangos, Sr............... 7,051,911 156,500 7,208,411 3.3% 1.3%
Alexander W. Rangos.............. 1,646,422 290,543 1,936,965 * *
Kosti Shirvanian................. 6,146,542 3,097,159 9,243,701 4.2% 1.6%
David Sutherland-Yoest........... 207,013 232,741 439,754 * *
Jerome B. York................... 10,000 0 10,000 * *
Earl E. DeFrates................. 37,754 187,000 224,754 * *
William A. Rothrock.............. 17,979 62,074 80,053 * *
Directors and executive officers
as a group (18 persons)........ 23,957,817 10.9% 4.2%
</TABLE>
- ------------------------
* Less than 1%.
(1) Ownership of shares shown for the following individuals includes shares of
USA Waste Common Stock not held directly by them but held by or for the
benefit of spouses, children or by related entities: Mr. Drury (5,176 shares
owned by spouse); Mr. Martin (7,820 shares owned by children); Alexander W.
Rangos (1,210,008 shares owned by the John Rangos Development Corporation,
Inc.); and Mr. Sutherland-Yoest (5,000 shares owned by daughter).
(2) Assumes that 350 million shares of USA Waste Common Stock will be issued in
connection with the Merger.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The following table sets
forth certain information as of December 31, 1997 with respect to the beneficial
ownership of USA Waste Common Stock by each
67
<PAGE>
stockholder known by USA Waste to beneficially own more than 5% of the
outstanding shares of USA Waste Common Stock, according to Schedules 13G filed
with the Commission by each named stockholder.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF USA WASTE PERCENT OF PERCENT OF NEW
COMMON STOCK USA WASTE WASTE MANAGEMENT
BENEFICIALLY COMMON STOCK COMMON STOCK
BENEFICIAL OWNER OWNED BEFORE THE MERGER AFTER THE MERGER (1)
- ------------------------------------------------------- ----------------- --------------------- -----------------------
<S> <C> <C> <C>
FMR Corp............................................... 28,345,889 13.0% 5.0%
82 Devonshire Street
Boston, MA 02109
Putnam Investments, Inc................................ 15,385,442 7.1% 2.7%
1 Post Office Square
Boston, MA 02109
American Express Financial Advisors.................... 14,304,580 6.6% 2.5%
IDS Tower 10
Minneapolis, MN 55440
</TABLE>
- ------------------------
(1) Assumes that 350 million shares of USA Waste Common Stock will be issued in
connection with the Merger.
WASTE MANAGEMENT
BUSINESS. Waste Management is a leading international provider of waste
management services. Waste Management provides integrated solid waste management
and hazardous waste management services in North America through its
subsidiaries. Outside of North America, Waste Management provides comprehensive
waste management and related services, including solid and hazardous waste
management services, through WM International. Through WTI, Waste Management is
a leading developer of facilities for, and provider of services to, the
trash-to-energy and waste-fuel powered independent power markets.
STOCK OWNERSHIP OF MANAGEMENT. The following table sets forth certain
information as of February 1, 1998 as to the beneficial ownership of Waste
Management Common Stock by the directors, each person who served as Chief
Executive Officer during 1997, the four other most highly compensated executive
officers of Waste Management as of December 31, 1997, two additional individuals
who were not serving as executive officers at December 31, 1997 but for whom
disclosure is required pursuant to the rules of the Commission, and all
directors and persons serving as executive officers of Waste Management as a
group:
<TABLE>
<CAPTION>
SHARES OTHER NUMBER OF SHARES
THAN OPTIONS OPTIONS OF WASTE MANAGEMENT PERCENT OF PERCENT OF NEW
EXERCISABLE EXERCISABLE COMMON STOCK WASTE MANAGEMENT WASTE MANAGEMENT
WITHIN WITHIN BENEFICIALLY OWNED COMMON STOCK COMMON STOCK
60 DAYS 60 DAYS (2) BEFORE THE MERGER AFTER THE MERGER (3)
------------ ----------- -------------------- --------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Directors
(Other than Executive
Officers)
H. Jesse Arnelle............. 1,338 15,000 16,338(4) * *
Pastora San Juan Cafferty.... 5,000 12,000 17,000 * *
Jerry E. Dempsey............. 395,020 0 395,020 * *
James B. Edwards............. 2,277 9,000 11,277 * *
Donald F. Flynn.............. 508,234 0 508,234 * *
Roderick M. Hills............ 1,021 0 1,021 * *
Paul M. Montrone............. 4,500 3,000 7,500 * *
Peer Pedersen................ 232,258 0 232,258(4) * *
James R. Peterson............ 84,068 0 84,068(4) * *
John C. Pope................. 4,621 0 4,621 * *
Steven G. Rothmeier.......... 1,511 3,000 4,511 * *
Alexander B. Trowbridge...... 2,400 0 2,400(4) * *
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
SHARES OTHER NUMBER OF SHARES
THAN OPTIONS OPTIONS OF WASTE MANAGEMENT PERCENT OF PERCENT OF NEW
EXERCISABLE EXERCISABLE COMMON STOCK WASTE MANAGEMENT WASTE MANAGEMENT
WITHIN WITHIN BENEFICIALLY OWNED COMMON STOCK COMMON STOCK
60 DAYS 60 DAYS (2) BEFORE THE MERGER AFTER THE MERGER (3)
------------ ----------- -------------------- --------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Current and Former Executive
Officers(1)
Robert S. Miller............. 1,511 0 1,511(4) * *
Dean L. Buntrock............. 2,133,305 1,172,645 3,305,950 * *
Jerry W. Caudle.............. 44,387 120,291 164,678 * *
Herbert A. Getz.............. 82,564 182,762 265,326 * *
Joseph M. Holsten............ 63,193 67,924 131,117 * *
William P. Hulligan.......... 42,634 218,609 261,243 * *
James E. Koenig.............. 100,883 450,894 551,777 * *
Ronald T. LeMay.............. 0 0 0 * *
D.P. Payne................... 51,543 299,167 350,710 * *
Phillip B. Rooney............ 73,951 1,258,537 1,332,488 * *
All directors and executive
officers as a group,
including persons named
above (27 persons)......... 3,948,118 4,070,494 8,018,612 1.8% 1.4%
</TABLE>
- ------------------------
* Less than 1 percent.
(1) Pursuant to Waste Management's Non-Qualified Profit Sharing and Savings Plus
Plan, Messrs. Buntrock, Caudle, Getz, Holsten, Hulligan, Payne, Rooney, and
all executive officers as a group, acquired beneficial ownership of the
equivalent of an additional 77,943, 11,791, 368, 311, 25,737, 17,937, 66,086
and 209,868 shares, respectively, of Waste Management Common Stock in
connection with their voluntary deferral of incentive awards pursuant to the
terms of Waste Management's Corporate Incentive Bonus Plan.
(2) Directors and executive officers included in the group have sole voting
power and sole investment power over shares listed, except (i) shares
covered by options granted under Waste Management's stock option plans which
were exercisable within 60 days of February 1, 1998; (ii) shares held
pursuant to Waste Management's Profit Sharing and Savings Plan; (iii)
Messrs. Edwards, Pedersen and Peterson, whose shares listed above include
312, 12,856 and 1,668 shares issuable upon conversion of the convertible
subordinated notes due 2005 of Waste Management ("Waste Management Notes"),
respectively; and (iv) Messrs. Buntrock, Dempsey, Getz, Koenig, Miller and
Pedersen, and all executive officers and directors as a group (including
such individuals), who have shared voting and investment power over 146,833,
394,020, 42,032, 52,631, 1,000, 19,402 and 657,918 shares, respectively.
Such shares shown for Messrs. Buntrock, Dempsey and Pedersen are held in
trusts or foundations over which such individuals share voting and
investment power with other co-trustees or directors of such trusts and
foundations. Such shares shown for Messrs. Getz, Koenig and Miller are held
jointly with their spouses. Ownership of shares shown for Messrs. Buntrock,
Dempsey, Edwards, Getz, Koenig and Pope, and for all executive officers and
directors as a group, includes shares of Waste Management Common Stock not
held directly by them but held by or for the benefit of (i) their spouses or
(ii) their minor children and other children residing with them, as to which
they have neither investment power nor voting power. Shares were held by or
for the benefit of such spouses or children of the following persons and the
executive officers and directors as a group at February 1, 1998, in the
amounts indicated: Mr. Buntock--41,373 (held by spouse); Mr. Dempsey 1,000
(held by spouse); Dr. Edwards--254 (held by spouse with 104 such shares
issuable upon conversion of Waste Management Notes), Mr. Getz--240 (held by
spouse), Mr. Koenig--30 (held by spouse), Mr. Pope--600 (held in trust for
children); and all executive officers and directors as a group (including
such individuals)--43,604. Additionally, ownership of shares shown for Mr.
Koenig includes 1,200 shares held by him as trustee of a family trust in
which Mr. Koenig has no pecuniary interest. Each of the above named persons
and the members of such group disclaim any beneficial ownership of such
shares.
(3) Assumes that 350 million shares of USA Waste Common Stock will be issued in
connection with the Merger.
(4) Pursuant to Waste Management's Deferred Directors' Fee Plan, Messrs.
Arnelle, Miller, Pedersen, and Peterson have also acquired beneficial
ownership of the equivalent of 1,239, 1,158, 30,541 and 4,950 shares,
respectively, of Waste Management Common Stock through their voluntary
deferral of all or a portion of their directors' fees. Pursuant to Waste
Management's Directors' Phantom Stock Plan, Messrs. Pedersen, Peterson and
Trowbridge each have also acquired beneficial ownership of the equivalent of
40,000 shares of Waste Management Common Stock.
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<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. Waste Management does not
know of any person who, as of February 1, 1998, directly owned more than 5% of
Waste Management's outstanding common stock. Waste Management, however, received
a copy of a Schedule 13D filed by a group consisting of George Soros, Soros Fund
Management LLC, Quantum Industrial Partners LDC, QIH Management Investor, L.P.,
QIH Management, Inc., Stanley F. Druckenmiller and Duquesne Capital Management,
L.L.C. The Schedule 13D filed by such persons indicate that such persons may be
deemed to be a group within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Waste Management also
received a Schedule 13G for the year ended December 31, 1997 from Barrow,
Hanley, Mewhinney & Strauss, Inc. ("BHMS"). Pursuant to the aggregation and
attribution rules relating to the beneficial ownership of securities promulgated
under the Exchange Act, BHMS is deemed to be the beneficial owner of such shares
shown because BHMS is an investment management company which exercises
discretionary investment management over accounts holding such shares. No
managed account alone owns 5% or more of the Waste Management Common Stock. The
information presented in the following table is taken from the above-referenced
Schedules 13D and 13G:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF PERCENT OF NEW
OF WASTE MANAGEMENT WASTE MANAGEMENT WASTE MANAGEMENT
COMMON STOCK COMMON STOCK COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE THE MERGER AFTER THE MERGER (1)
- ---------------------------------------------------- -------------------- ------------------- -----------------------
<S> <C> <C> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc............ 22,684,500 5.0% 4.0%
One McKinney Plaza
3232 McKinney Avenue
Dallas, Texas 75204-2429
George Soros........................................ 25,225,600 5.5% 4.4%
Soros Fund Management LLC
QIH Management Investor, L.P.
QIH Management, Inc.
Stanley F. Druckenmiller
888 Seventh Avenue, 33rd Floor
New York, New York 10106
Quantum Industrial Partners LDC
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Duquesne Capital Management, L.L.C.
2579 Washington Road, Suite 322
Pittsburgh, Pennsylvania 15241-2591
</TABLE>
- ------------------------
(1) Assumes that 350 million shares of USA Waste Common Stock will be issued in
connection with the Merger.
NEW WASTE MANAGEMENT
BUSINESS. New Waste Management will be a leading international provider of
waste management services. New Waste Management will be the largest waste
management services company in North America and will have an extensive network
of landfills, collection operations and transfer stations throughout North
America. The corporate headquarters of New Waste Management will be located in
Houston, Texas, at the current corporate headquarters of USA Waste. The combined
company is expected to maintain regional offices in the Chicago, Illinois area,
which is currently the location of the corporate headquarters of Waste
Management.
FORECASTED AND RELATED PRO FORMA FINANCIAL INFORMATION. The forecasted
financial information presented below was prepared to reflect the forecasted
results of operations for the years 1998 through 2000. For purposes of this
forecasted information, the Merger is assumed to be consummated October 1,
70
<PAGE>
1998, and is to be accounted for as a pooling of interests. To provide
comparable financial information, the 1998 year is also presented on a pro forma
basis as if the Merger was consummated January 1, 1998.
<TABLE>
<CAPTION>
NEW WASTE MANAGEMENT
FORECASTED AND RELATED PRO FORMA FINANCIAL
INFORMATION
-------------------------------------------
1998 1999 2000
------------- ------------- -------------
(IN BILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating revenue.................................................... $12.5 $13.8 $15.3
EPS--Diluted:
Forecasted......................................................... $1.75-$1.90 $2.90-$3.05 $3.55-$3.70
Pro forma.......................................................... $2.35-$2.50
EBITDA:
Forecasted......................................................... $4.0 $5.3 $6.1
Pro forma.......................................................... $4.6
</TABLE>
This forward looking forecasted and related pro forma information involves
significant judgments and assumptions which may not be realized and are
inherently subject to significant uncertainties, all of which are difficult to
predict and many of which are beyond the control of USA Waste and Waste
Management. Accordingly, there can be no assurance this forward looking
forecasted and related pro forma information will be realized and actual results
may vary materially from those shown above. In addition, the pro forma
information presents 1998 results as if the Merger was consummated on January 1,
1998 and a full year of operating synergies and cost savings were realized. See
"Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements".
The significant assumptions to this forward looking forecasted and related pro
forma information are as follows:
- Pursuant to the Merger, each outstanding share of Waste Management Common
Stock will be exchanged for 0.725 of a share of USA Waste Common Stock and
the Merger will be accounted for using the pooling of interests method of
accounting as if the companies had been combined since their inception.
- Forecasted information for 1998, 1999 and 2000 and related pro forma
information for 1998 was prepared on the individual forecasts of operating
results of USA Waste and Waste Management and assumed annualized operating
synergies and cost savings of approximately $800 million, increasing at a
rate of 4% due to inflation through 2000. For the 1998 forecasted
financial information, the Merger is assumed to have occurred October 1,
1998, and operating synergies and cost savings are assumed to be $200
million. For the 1998 related pro forma financial information, the Merger
is assumed to have been consummated on January 1, 1998.
- The forecasted and related pro forma information excludes the effect of
nonrecurring and certain other charges to operations. Such charges are
expected to include, but not be limited to, any provision related to the
settlement of the purported class action lawsuit and the Commission's
investigation with respect to Waste Management's previously filed
financial statements and related accounting practices, the recognition of
an expense related to the rights of certain Waste Management optionholders
to sell their options to New Waste Management for a one-year period
following the occurrence of a "change in control", such as the Merger, and
costs directly related to the Merger, which have yet to be determined but
are expected to be significant.
- Issuance, prior to the Merger, of approximately 20 million shares of Waste
Management Common Stock to reverse certain share repurchases effected by
Waste Management in order to permit the Merger to qualify as a pooling of
interests for accounting and financial reporting purposes. See "The Merger
Agreement -- Pooling Matters".
Neither USA Waste nor Waste Management, as a matter of course, makes public
forecasts as to its respective future performance or earnings. In light of the
uncertainties inherent in forecasts of any kind,
71
<PAGE>
the inclusion of this forecast herein should not be regarded as a representation
of USA Waste, Waste Management or New Waste Management or any other person that
the forecast will be achieved. Stockholders and investors are cautioned not to
place undue reliance on this forecast.
The forecasted and related pro forma financial data has not been audited,
complied or otherwise examined by any independent certified public accountant.
The forecasted and related pro forma financial data was not prepared with a view
to compliance with the published guidelines established by the American
Institute of Certified Public Accountants for preparation and presentation of
financial forecasts.
None of USA Waste, Waste Management or New Waste Management intend to update
or otherwise revise the forecasted or related pro forma financial data to
reflect circumstances existing after the date of this forecast and related pro
forma or to reflect the occurrence of unanticipated events.
72
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth for the periods and as of the dates indicated
(a) certain unaudited historical per share data of USA Waste and Waste
Management; (b) combined unaudited pro forma per share data after giving effect
to the Merger under the pooling of interests method of accounting as if the
Merger had been consummated as of the beginning of the periods presented (and
assuming the issuance of 0.725 of a share of USA Waste Common Stock in exchange
for each outstanding share of Waste Management Common Stock); and (c) the Waste
Management equivalent combined unaudited pro forma per share data attributable
to the 0.725 of a share of USA Waste Common Stock that will be received by Waste
Management stockholders for each share of Waste Management Common Stock. This
data should be read in conjunction with the selected historical financial
information and the combined unaudited pro forma condensed financial statements
included elsewhere in this Joint Proxy Statement/Prospectus and the separate
historical financial statements of USA Waste and Waste Management incorporated
by reference herein. The combined unaudited pro forma financial data are not
necessarily indicative of the operating results or financial position that would
have been achieved if the Merger had been consummated as of the beginning of the
periods presented, nor are they necessarily indicative of the future operating
results or financial position of New Waste Management.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------------- ---------------
1995 1996 1997 1998
--------- --------- --------- ---------------
<S> <C> <C> <C> <C>
HISTORICAL -- USA WASTE
Basic earnings per common share:
Income before extraordinary item....................................... $ 0.56 $ 0.39 $ 1.31 $ 0.55
Extraordinary item..................................................... -- -- (0.03) --
--------- --------- --------- ------
Net income............................................................. $ 0.56 $ 0.39 $ 1.28 $ 0.55
--------- --------- --------- ------
--------- --------- --------- ------
Diluted earnings per common share:
Income before extraordinary item....................................... $ 0.54 $ 0.37 $ 1.26 $ 0.52
Extraordinary item..................................................... -- -- (0.03) --
--------- --------- --------- ------
Net income............................................................. $ 0.54 $ 0.37 $ 1.23 $ 0.52
--------- --------- --------- ------
--------- --------- --------- ------
Book value per common share.............................................. $ 12.62
Tangible book value per common share..................................... 3.38
HISTORICAL -- WASTE MANAGEMENT
Basic earnings (loss) per common share:
Continuing operations.................................................. $ 0.86 $ 0.46 $ (2.72) $ 0.16
Discontinued operations................................................ 0.01 (0.54) 0.20 --
Extraordinary item..................................................... -- -- -- --
Cumulative effect of changes in accounting principles.................. (0.17) -- -- --
--------- --------- --------- ------
Net income (loss)...................................................... $ 0.70 $ (0.08) $ (2.52) $ 0.16
--------- --------- --------- ------
--------- --------- --------- ------
Diluted earnings (loss) per common share:
Continuing operations.................................................. $ 0.86 $ 0.46 $ (2.72) $ 0.16
Discontinued operations................................................ 0.01 (0.54) 0.20 --
Extraordinary item..................................................... -- -- -- --
Cumulative effect of changes in accounting principles.................. (0.17) -- -- --
--------- --------- --------- ------
Net income (loss)...................................................... $ 0.70 $ (0.08) $ (2.52) $ 0.16
--------- --------- --------- ------
--------- --------- --------- ------
Cash dividends per common share.......................................... $ 0.60 $ 0.63 $ 0.67 $ 0.17
Book value per common share.............................................. 2.98
Tangible book value per common share..................................... (5.12)
COMBINED UNAUDITED PRO FORMA
Basic earnings (loss) per common share from continuing operations........ $ 1.00 $ 0.55 $ (1.88) $ 0.33
Diluted earnings (loss) per common share from continuing operations...... 0.99 0.54 (1.88) 0.32
Cash dividends per common share.......................................... 0.59 0.58 0.57 0.14
Book value per common share.............................................. 8.23
Tangible book value per common share..................................... (1.78)
WASTE MANAGEMENT EQUIVALENT COMBINED UNAUDITED PRO FORMA
Basic earnings (loss) per common share from continuing operations........ $ 0.73 $ 0.40 $ (1.36) $ 0.24
Diluted earnings (loss) per common share from continuing operations...... 0.72 0.39 (1.36) 0.23
Cash dividends per common share.......................................... 0.43 0.42 0.41 0.10
Book value per common share.............................................. 5.97
Tangible book value per common share..................................... (1.29)
</TABLE>
73
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
USA Waste Common Stock is traded on the NYSE under the symbol "UW". Waste
Management Common Stock is traded on the NYSE and the Chicago Stock Exchange
under the symbol "WMX".
MARKET PRICES
The table below sets forth, for the calendar quarters indicated, the range
of high and low sale prices of USA Waste Common Stock and Waste Management
Common Stock as reported on the NYSE Composite Transaction Tape.
<TABLE>
<CAPTION>
WASTE MANAGEMENT
USA WASTE
COMMON STOCK COMMON STOCK
-------------------- --------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
--------- --------- --------- ---------
1996
Quarter ended March 31, 1996............................................... $ 25.63 $ 17.25 $ 32.13 $ 27.75
Quarter ended June 30, 1996................................................ 32.63 24.00 36.13 31.63
Quarter ended September 30, 1996........................................... 34.13 22.75 33.25 28.63
Quarter ended December 31, 1996............................................ 34.25 28.63 36.63 32.13
1997
Quarter ended March 31, 1997............................................... $ 38.88 $ 28.63 $ 37.50 $ 30.13
Quarter ended June 30, 1997................................................ 39.25 29.50 34.25 28.00
Quarter ended September 30, 1997........................................... 44.13 38.00 35.38 29.25
Quarter ended December 31, 1997............................................ 41.75 32.63 35.00 21.94
1998
Quarter ended March 31, 1998............................................... $ 46.88 $ 34.44 $ 32.25 $ 22.06
Quarter ended June 30, 1998 (through June 9, 1998).........................
</TABLE>
In February 1997, the Waste Management Board approved a new repurchase
program to replace a stock repurchase program approved in December 1995. Under
the new program, Waste Management is authorized to purchase during 1997 and 1998
up to 50 million shares of Waste Management Common Stock in the open market, in
privately negotiated transactions or through issuer tender offers. Waste
Management repurchased 30 million shares through a "Dutch auction" tender offer
in the second quarter of 1997 but did not repurchase any other shares that year.
Waste Management does not expect to make any repurchases in 1998.
During 1994, 1995 and 1996, Waste Management sold put options on 42.3
million shares of its common stock in conjunction with the repurchase program.
The put options gave the holders the right at maturity to require Waste
Management to repurchase its shares at specified prices. In the event the
options were exercised, Waste Management could elect to pay the holder in cash
the difference between the strike price and the market price of the Waste
Management shares, in lieu of repurchasing the stock. There were no put options
outstanding at December 31, 1997 and Waste Management does not at this time
expect to sell additional options in the future. For information concerning the
exercise or expiration of these put options and related information, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Financial Condition" included in the Waste Management 1997 Form
10-K incorporated herein by reference.
On March 10, 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 USA Waste Common Stock on the NYSE Composite Transaction
Tape was $39.13 per share, and the last reported sale price of Waste Management
Common Stock on the NYSE Composite Transaction Tape was $25.19 per share.
74
<PAGE>
Based on the Exchange Ratio, the pro forma equivalent value of Waste Management
Common Stock at the closing of trading on March 10, 1998 was $28.37 per share.
On June 9, 1998, the most recent practicable date prior to the printing of
this Joint Proxy Statement/ Prospectus, the last reported sale price of USA
Waste Common Stock on the NYSE Composite Transaction Tape was $[ ] per
share, and the last reported sale price of Waste Management Common Stock on the
NYSE Composite Transaction Tape was $[ ] per share.
Because the market price of USA Waste Common Stock is subject to
fluctuation, the market value of the shares of USA Waste Common Stock that
holders of Waste Management Common Stock will receive in the Merger, and the
market value of the Waste Management Common Stock surrendered in the Merger, may
increase or decrease prior to (or after) the Merger.
USA WASTE AND WASTE MANAGEMENT STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE USA WASTE COMMON STOCK AND THE WASTE MANAGEMENT COMMON
STOCK.
DIVIDENDS
USA WASTE DIVIDENDS. USA Waste has never paid cash dividends on USA Waste
Common Stock.
WASTE MANAGEMENT DIVIDENDS. Waste Management has paid cash dividends on
Waste Management Common Stock since 1976. Dividends are declared and paid
quarterly. Waste Management recently announced that it will reduce its quarterly
dividend to $0.01 per share commencing with the dividend declared in the second
quarter of 1998. The following table sets forth dividends in respect of Waste
Management Common Stock declared in each of the last two years.
<TABLE>
<CAPTION>
DIVIDENDS PER SHARE
--------------------------------------------------
<S> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
1996....................................................................... $ 0.15 $ 0.16 $ 0.16 $ 0.16
1997....................................................................... 0.16 0.17 0.17 0.17
1998....................................................................... 0.17
</TABLE>
The Waste Management Board declared a $0.01 per share dividend on May 15,
1998 which will be payable on July 2, 1998 to stockholders of record on June 17,
1998.
Waste Management's ability to pay dividends is restricted under a credit
agreement; however, so long as no event of default has occurred and is
continuing, Waste Management is permitted to pay regularly scheduled dividends
in amounts not to exceed $100 million in any calendar quarter. However, the
Merger Agreement limits Waste Management to current dividends of $0.17 per
share, or approximately $77.35 million per quarter.
NEW WASTE MANAGEMENT DIVIDENDS. The decision whether to apply legally
available funds to the payment of dividends on New Waste Management Common Stock
will be made by the New Waste Management Board from time to time in the exercise
of its business judgment.
75
<PAGE>
COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following combined unaudited pro forma condensed financial statements
are based upon the historical financial statements of USA Waste and of Waste
Management and should be read in conjunction with those financial statements and
related notes. Such financial statements, as previously filed with the
Commission under the Exchange Act, are incorporated by reference in this Joint
Proxy Statement/ Prospectus. These combined unaudited pro forma condensed
financial statements give effect to the Merger by combining the balance sheets
and results of operations of USA Waste and Waste Management using the pooling of
interests method of accounting as if the companies had been combined since their
inception. The combined unaudited pro forma condensed financial information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have been achieved had
the Merger been consummated as of the beginning of the periods presented, nor is
it necessarily indicative of the future operating results or financial position
of New Waste Management. The combined unaudited pro forma condensed financial
information does not give effect to any possible divestitures of business units
which may be required by the antitrust regulatory authorities or to any cost
savings which may result from the integration of USA Waste's and Waste
Management's operations, nor does such information include the nonrecurring
costs directly related to the Merger which are expected to be included in
operations of New Waste Management within the 12 months following the Merger.
Such nonrecurring costs have yet to be determined; however, such costs are
expected to be significant.
76
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1998
The following combined unaudited pro forma condensed balance sheet presents
the combined financial position of USA Waste and Waste Management as of March
31, 1998. Such unaudited pro forma combined condensed balance sheet is based on
the historical balance sheets of USA Waste and Waste Management as of March 31,
1998, after giving effect to the Merger using the pooling of interests method of
accounting and to the pro forma adjustments as described in the notes to
combined pro forma condensed financial statements.
<TABLE>
<CAPTION>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 46,260 $ 311,861 $ -- $ 358,121
Short-term investments................................. -- 3,053 -- 3,053
Accounts receivable, net............................... 468,619 1,448,797 -- 1,917,416
Notes and other receivables............................ 56,321 26,577 -- 82,898
Deferred income taxes.................................. 46,196 -- -- 46,196
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ -- 158,964 -- 158,964
Prepaid expenses and other............................. 58,891 230,374 -- 289,265
----------- ------------ ----------- ----------
Total current assets............................... 676,287 2,179,626 -- 2,855,913
Notes and other receivables............................ 22,951 100,044 -- 122,995
Property and equipment, net............................ 4,601,573 7,126,426 (10,922)(a) 11,617,441
(99,636)(b)
Excess of cost over net assets of acquired businesses,
net.................................................. 1,905,285 3,674,333 (66,464)(a) 5,513,154
Other intangible assets, net........................... 126,526 11,746 -- 138,272
Net assets of continuing businesses held for sale...... -- 137,995 -- 137,995
Other assets........................................... 256,783 633,830 (28,124)(c) 862,489
----------- ------------ ----------- ----------
Total assets....................................... $7,589,405 $ 13,864,000 $(205,146) $21,248,259
----------- ------------ ----------- ----------
----------- ------------ ----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 196,735 $ 687,419 $ -- $ 884,154
Accrued liabilities.................................... 185,631 1,683,398 -- 1,869,029
Obligation to former Wheelabrator Technologies Inc.
shareholders......................................... -- 876,232 (614,400)(d) 261,832
Deferred revenues...................................... 69,484 236,339 -- 305,823
Current maturities of long-term debt................... 46,527 1,025,685 -- 1,072,212
----------- ------------ ----------- ----------
Total current liabilities.......................... 498,377 4,509,073 (614,400) 4,393,050
Long-term debt, less current maturities................ 3,584,887 5,398,132 -- 8,983,019
Deferred income taxes.................................. 323,320 216,797 (25,029)(a) 520,293
5,205(b)
Closure, post-closure, and other liabilities........... 407,699 1,645,663 (85,557)(b) 1,967,805
----------- ------------ ----------- ----------
Total liabilities.................................. 4,814,283 11,769,665 (719,781) 15,864,167
----------- ------------ ----------- ----------
Minority interest in subsidiaries........................ -- 739,442 -- 739,442
----------- ------------ ----------- ----------
</TABLE>
77
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET (CONTINUED)
MARCH 31, 1998
<TABLE>
<CAPTION>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)
Commitments and contingencies
Stockholders' equity:
Preferred stock:
USA Waste: $.01 par value; 10,000,000 shares
authorized; none issued............................ -- -- -- --
Waste Management: $1 par value; 50,000,000 shares
authorized; none outstanding....................... -- -- -- --
Common stock:
USA Waste: $.01 par value, 500,000,000 shares
authorized; historical 219,834,550 shares
(572,269,938 pro forma shares) issued.............. 2,198 -- 3,525(d) 5,723
Waste Management: $1 par value; 1,500,000,000 shares
authorized; 507,101,744 shares issued.............. -- 507,102 (507,102 (d) --
Additional paid-in capital............................. 2,436,447 990,270 (11,250 (c) 3,267,468
(147,999 (d)
Retained earnings...................................... 374,459 1,730,516 (34,888 (a) 2,033,929
(19,284 (b)
(16,874 (c)
Accumulated other comprehensive income................. (37,498) -- (278,800 (e) (316,298)
Foreign currency translation adjustment................ -- (253,938) (17,469 (a) --
271,407(e)
Treasury stock:
USA Waste: 23,485 shares, at cost.................... (484) -- -- (484)
Waste Management: 40,983,967 shares, at cost......... -- (1,265,976) 1,265,976(d) --
Restricted stock unearned compensation................. -- (10,252) -- (10,252)
Employee stock benefit trust; 10,886,361 WMI shares, at
market (7,892,612 pro forma shares).................. -- (335,436) -- (335,436)
Minimum pension liability.............................. -- (7,393) 7,393(e) --
----------- ------------ ------------ ----------
Total stockholders' equity........................... 2,775,122 1,354,893 514,635 4,644,650
----------- ------------ ------------ ----------
Total liabilities and stockholders' equity........... $7,589,405 $ 13,864,000 $ (205,146) $21,248,259
----------- ------------ ------------ ----------
----------- ------------ ------------ ----------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
78
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the three months ended March 31, 1998 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such period after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
----------------------------------------------------
<S> <C> <C> <C> <C>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
----------- ------------ ----------- ------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues...................................... $ 769,440 $2,131,621 $ -- 2,901,061
----------- ------------ ----------- ------------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below)........................................ 397,492 1,621,985 3,785(b) 1,757,707
(265,555)(f)
General and administrative............................ 81,916 263,882 (217)(f) 345,581
Depreciation and amortization......................... 86,110 -- (424)(a) 351,458
265,772(f)
Loss from continuing operations held for sale,
net of minority interest.............................. -- 2,416 -- 2,416
----------- ------------ ----------- ------------
565,518 1,888,283 3,361 2,457,162
----------- ------------ ----------- ------------
Income from operations.................................. 203,922 243,338 (3,361) 443,899
----------- ------------ ----------- ------------
Other income (expenses):
Interest expense...................................... (38,368) (115,574) -- (153,942)
Interest income....................................... 1,799 4,310 -- 6,109
Minority interest..................................... -- (25,302) -- (25,302)
Other income, net..................................... 34,251 64,196 (28,124)(c) 70,323
----------- ------------ ----------- ------------
(2,318) (72,370) (28,124) (102,812)
----------- ------------ ----------- ------------
Income before income taxes.............................. 201,604 170,968 (31,485) 341,087
Provision for income taxes.............................. 80,642 96,551 170(a) 161,815
(4,298)(b)
(11,250)(c)
----------- ------------ ----------- ------------
Net income.............................................. $ 120,962 $ 74,417 $ (16,107) $ 179,272
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Basic earnings per common share......................... $ 0.55 $ 0.16 $ 0.33
----------- ------------ ------------
----------- ------------ ------------
Diluted earnings per common share....................... $ 0.52 $ 0.16 $ 0.32
----------- ------------ ------------
----------- ------------ ------------
Weighted average number of common shares outstanding.... 219,201 455,096 (125,151)(g) 549,146
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Weighted average number of common and dilutive potential
common shares outstanding............................. 244,250 455,296 (125,206)(g) 574,340
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
79
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1997 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such year after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------
<S> <C> <C> <C> <C>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
----------- ------------ ----------- -------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues.......................................... $ 2,613,768 $ 9,188,582 $ -- $ 11,802,350
----------- ------------ ----------- -------------
Costs and expenses:
Operating (exclusive of depreciation and
amortization shown below)............................... 1,345,769 7,195,376 17,766(b) 7,479,745
(1,079,166)(f)
General and administrative................................ 284,946 1,129,237 (939)(f) 1,413,244
Depreciation and amortization............................. 303,241 -- (990)(a) 1,382,356
1,080,105(f)
Merger costs.............................................. 109,411 -- -- 109,411
Unusual items............................................. 24,720 1,626,252 -- 1,650,972
Loss from continuing operations held for sale,
net of minority interest.................................. -- 9,930 -- 9,930
----------- ------------ ----------- -------------
2,068,087 9,960,795 16,776 12,045,658
----------- ------------ ----------- -------------
Income (loss) from operations............................... 545,681 (772,213) (16,776) (243,308)
----------- ------------ ----------- -------------
Other income (expense):
Interest expense.......................................... (104,261) (446,888) -- (551,149)
Interest income........................................... 7,634 37,580 -- 45,214
Minority interest......................................... -- (45,442) -- (45,442)
Other income, net......................................... 14,213 173,290 (61,331)(a) 126,172
----------- ------------ ----------- -------------
(82,414) (281,460) (61,331) (425,205)
----------- ------------ ----------- -------------
Income (loss) from continuing operations before
income taxes.............................................. 463,267 (1,053,673) (78,107) (668,513)
Provision for income taxes.................................. 189,944 215,667 (25,199)(a) 361,464
(18,948)(b)
----------- ------------ ----------- -------------
Income (loss) from continuing operations.................... $ 273,323 $ (1,269,340) $ (33,960) $ (1,029,977)
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------
Basic earnings (loss) per common share from
continuing operations..................................... $ 1.31 $ (2.72) $ (1.88)
----------- ------------ -------------
----------- ------------ -------------
Diluted earnings (loss) per common share from continuing
operations................................................ $ 1.26 $ (2.72) $ (1.88)
----------- ------------ -------------
----------- ------------ -------------
Weighted average number of common shares
outstanding............................................... 208,246 466,601 (128,315)(g) 546,532
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------
Weighted average number of common and dilutive potential
common shares outstanding................................. 233,371 466,601 (153,440)(g) 546,532
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
80
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1996 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such year after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
WASTE PRO FORMA COMBINED
USA WASTE MANAGEMENT ADJUSTMENTS PRO FORMA
------------ ------------ ------------- -------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues........................................ $ 1,649,131 $9,225,636 $ -- $ 10,874,767
------------ ------------ ------------- -------------
Costs and expenses:
Operating (exclusive of depreciation and amortization
shown below).......................................... 881,401 6,660,766 21,135(b) 6,498,708
(1,064,594 (f)
General and administrative.............................. 200,101 1,095,459 (1,089 (f) 1,294,471
Depreciation and amortization........................... 191,044 -- 1,065,683(f) 1,256,727
Merger costs............................................ 126,626 -- -- 126,626
Unusual items........................................... 63,800 435,464 -- 499,264
Income from continuing operations held for sale, net of
minority interest....................................... -- (315) -- (315)
------------ ------------ ------------- -------------
1,462,972 8,191,374 21,135 9,675,481
------------ ------------ ------------- -------------
Income from operations.................................... 186,159 1,034,262 (21,135) 1,199,286
------------ ------------ ------------- -------------
Other income (expense):
Interest expense........................................ (60,497) (462,424) -- (522,921)
Interest income......................................... 6,699 27,904 -- 34,603
Minority interest....................................... -- (41,289) -- (41,289)
Other income, net....................................... 6,376 102,014 -- 108,390
------------ ------------ ------------- -------------
(47,422) (373,795) -- (421,217)
------------ ------------ ------------- -------------
Income from continuing operations before income taxes..... 138,737 660,467 (21,135) 778,069
Provision for income taxes................................ 70,398 436,473 (20,255 (b) 486,616
------------ ------------ ------------- -------------
Income from continuing operations......................... $ 68,339 $ 223,994 $ (880) $ 291,453
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Basic earnings per common share from continuing
operations.............................................. $ 0.39 $ 0.46 $ 0.55
------------ ------------ -------------
------------ ------------ -------------
Diluted earnings per common share from continuing
operations.............................................. $ 0.37 $ 0.46 $ 0.54
------------ ------------ -------------
------------ ------------ -------------
Weighted average number of common shares outstanding...... 173,993 489,171 (134,522 (g) 528,642
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Weighted average number of common and dilutive potential
common shares outstanding............................... 182,680 490,029 (134,758 (g) 537,951
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
81
<PAGE>
USA WASTE AND WASTE MANAGEMENT
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended December 31, 1995 was prepared based on the historical
statements of operations of USA Waste and Waste Management for such year after
giving effect to the Merger using the pooling of interests method of accounting
and to the pro forma adjustments described in the notes to combined unaudited
pro forma condensed financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------
WASTE PRO FORMA
USA WASTE MANAGEMENT ADJUSTMENTS
------------ ----------- ----------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Operating revenues.................................................... $ 1,216,082 $9,100,225 $ --
------------ ----------- ----------------
Costs and expenses:
Operating (exclusive of depreciation and amortization shown
below)............................................................ 672,117 6,514,932 22,924(b)
(1,033,777)(f)
General and administrative.......................................... 169,686 1,091,747 (1,241)(f)
Depreciation and amortization....................................... 143,878 -- 1,035,018(f)
Merger costs........................................................ 26,539 -- --
Unusual items....................................................... 4,733 389,359 --
Income from continuing operations held for sale, net of minority
interest............................................................ -- (25,110) --
------------ ----------- ----------------
1,016,953 7,970,928 22,924
------------ ----------- ----------------
Income from operations................................................ 199,129 1,129,297 (22,924)
------------ ----------- ----------------
Other income (expense):
Interest expense:
Nonrecurring...................................................... (10,994) -- --
Other............................................................. (58,619) (463,861) --
Interest income..................................................... 6,682 34,883 --
Minority interest................................................... -- (81,367) --
Other income, net................................................... 4,891 252,695 --
------------ ----------- ----------------
(58,040) (257,650) --
------------ ----------- ----------------
Income from continuing operations before income taxes................. 141,089 871,647 (22,924)
Provision for income taxes............................................ 60,313 451,741 (19,169)(b)
------------ ----------- ----------------
Income from continuing operations..................................... $ 80,776 $ 419,906 $ (3,755)
------------ ----------- ----------------
------------ ----------- ----------------
Basic earnings per common share from continuing operations............ $ 0.56 $ 0.86
------------ -----------
------------ -----------
Diluted earnings per common share from continuing
operations.......................................................... $ 0.54 $ 0.86
------------ -----------
------------ -----------
Weighted average number of common shares outstanding.................. 143,346 485,346 (133,470)(g)
------------ ----------- ----------------
------------ ----------- ----------------
Weighted average number of common and dilutive potential common shares
outstanding......................................................... 150,575 500,312 (137,586)(g)
------------ ----------- ----------------
------------ ----------- ----------------
<CAPTION>
COMBINED
PRO FORMA
------------
<S> <C>
Operating revenues.................................................... $ 10,316,307
------------
Costs and expenses:
Operating (exclusive of depreciation and amortization shown
below)............................................................ 6,176,196
General and administrative.......................................... 1,260,192
Depreciation and amortization....................................... 1,178,896
Merger costs........................................................ 26,539
Unusual items....................................................... 394,092
Income from continuing operations held for sale, net of minority
interest............................................................ (25,110)
------------
9,010,805
------------
Income from operations................................................ 1,305,502
------------
Other income (expense):
Interest expense:
Nonrecurring...................................................... (10,994)
Other............................................................. (522,480)
Interest income..................................................... 41,565
Minority interest................................................... (81,367)
Other income, net................................................... 257,586
------------
(315,690)
------------
Income from continuing operations before income taxes................. 989,812
Provision for income taxes............................................ 492,885
------------
Income from continuing operations..................................... $ 496,927
------------
------------
Basic earnings per common share from continuing operations............ $ 1.00
------------
------------
Diluted earnings per common share from continuing
operations.......................................................... $ 0.99
------------
------------
Weighted average number of common shares outstanding.................. 495,222
------------
------------
Weighted average number of common and dilutive potential common shares
outstanding......................................................... 513,301
------------
------------
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
82
<PAGE>
USA WASTE AND WASTE MANAGEMENT
NOTES TO COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The combined unaudited pro forma condensed financial statements assume the
issuance of USA Waste Common Stock in exchange for all outstanding Waste
Management Common Stock. Such financial statements also assume that the Merger
will be accounted for using the pooling of interests method of accounting
pursuant to Opinion No. 16 of the Accounting Principles Board. The pooling of
interests method of accounting assumes that the combining companies have been
merged from their inception, and the historical financial statements for periods
prior to consummation of the Merger are restated as though the companies had
been combined from their inception.
Pursuant to the rules and regulations of the Commission, the combined
unaudited pro forma condensed statements of operations exclude the results of
operations associated with discontinued businesses, extraordinary items and
cumulative effects of accounting changes. The combined unaudited pro forma
condensed financial statements do not give effect to any cost savings which may
result from the integration of USA Waste's and Waste Management's operations,
nor do they include the nonrecurring costs directly related to the Merger which
are expected to be included in operations of New Waste Management within twelve
months succeeding the Merger. Such nonrecurring costs have yet to be determined;
however, such costs are expected to be significant.
Certain reclassifications have been made to the historical financial
statements of USA Waste and Waste Management to conform to the pro forma
presentation. Such reclassifications are not material to the combined unaudited
pro forma condensed financial statements.
2. PRO FORMA ADJUSTMENTS
(a) In June 1997, Waste Management sold a majority of its Canadian solid
waste businesses to USA Waste and, as a result of such sale, recorded a pre-tax
gain of approximately $61,331,000. USA Waste accounted for this transaction as a
purchase business combination and allocated the purchase price to the assets
acquired and liabilities assumed accordingly. Assuming that USA Waste and Waste
Management had been combined since their inception, the gain recorded by Waste
Management in 1997 has been eliminated and the basis recorded by USA Waste for
assets acquired and liabilities assumed has been restored to Waste Management's
historical book value. In addition, the Combined Unaudited Pro Forma Condensed
Statement of Operations for the year ended December 31, 1997 and the three
months ended March 31, 1998 have been adjusted for the effect of lower
amortization as a result of restoring the book basis of the assets acquired and
liabilities assumed by USA Waste to the historical book value of Waste
Management.
(b) Adjustments have been made to conform the accounting for certain
landfill related issues as if the companies had been combined since their
inception. The net impact of those adjustments on income (loss) from continuing
operations was an increase of $1,182,000 and $513,000 for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively, and a
decrease of $3,755,000 and $880,000 for the years ended December 31, 1995 and
1996, respectively.
(c) In November 1997, USA Waste purchased a 49% limited partner interest in
the Limited Partnership, which was formed for the purpose of acquiring shares of
Waste Management Common Stock on the open market. The Limited Partnership
purchased shares of Waste Management Common Stock during November 1997 and sold
substantially all of such shares in March 1998. For the three months ended March
31, 1998, USA Waste recorded other income of $28,124,000 for its equity in the
earnings of the Limited Partnership. An adjustment has been made to reverse USA
Waste's equity in the earnings of the
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<PAGE>
2. PRO FORMA ADJUSTMENTS (CONTINUED)
Limited Partnership to account for the transaction as if the companies had been
combined since their inception.
(d) The stockholders' equity accounts have been adjusted to reflect the
assumed issuance of 352,435,388 shares of USA Waste Common Stock for the
486,117,777 shares of Waste Management Common Stock issued and outstanding based
on an exchange ratio of 0.725 of a share of USA Waste Common Stock for each
outstanding share of Waste Management Common Stock. The assumed issuance of
shares considers the 507,101,744 shares of Waste Management Common Stock issued,
the 40,983,967 shares of Waste Management Common Stock held in treasury that
will be cancelled upon consummation of the Merger, and the 20 million shares of
Waste Management Common Stock expected to be issued to reverse certain share
repurchases effected by Waste Management. Assuming that 20 million shares of
Waste Management Common Stock are issued through a public sale at an offering
price of $32 per share and net issuance costs of 4%, net proceeds would be
$614,400,000, which would be used to reduce the obligation to former WTI
stockholders. See Note 3 below. The actual number of shares of USA Waste Common
Stock to be issued pursuant to the Merger will be based upon the number of
shares of Waste Management Common Stock issued and outstanding immediately prior
to the consummation of the Merger.
(e) Adjustments have been made to reclassify Waste Management's foreign
currency translation adjustment and minimum pension liability to accumulated
other comprehensive income to conform to the presentation of USA Waste as if the
companies had been combined since their inception.
(f) Adjustments have been made to reclassify Waste Management's depreciation
and amortization from operating expenses and general and administrative expenses
to a separate line item to conform to the presentation of USA Waste as if the
companies had been combined since their inception.
(g) Pro forma basic earnings per common share for each period are based on
the combined weighted average number of common shares outstanding, after giving
effect to the issuance of 0.725 of a share of USA Waste Common Stock for each
share of Waste Management Common Stock. Pro forma diluted earnings per common
share for each period are based on the combined weighted average number of
common and dilutive potential common shares outstanding, after giving effect to
the issuance of 0.725 of a share of USA Waste Common Stock for each outstanding
share of Waste Management Common Stock. The combined weighted average shares
outstanding used in the pro forma basic and diluted earnings per share
calculations are net of the shares of Waste Management Common Stock that are
held by the Waste Management employee stock benefit trust and are treated
similar to treasury shares for earnings per share calculation purposes. The
combined pro forma diluted earnings per share for the year ended December 31,
1995 and the three months ended March 31, 1998 have been calculated assuming
conversion of certain convertible debt, and therefore interest, net of taxes, of
$9,100,000 and $5,014,000, respectively, has been added back to income from
continuing operations for this calculation. The USA Waste diluted earnings per
common share for the year ended December 31, 1997 includes 25,125,000 dilutive
potential common shares that become antidilutive for purposes of calculating the
combined pro forma diluted earnings per common share.
3. PRO FORMA EFFECT OF WASTE MANAGEMENT EQUITY OFFERING ON RESULTS OF OPERATIONS
As previously discussed, in order for the Merger to qualify as a pooling of
interests, approximately 20 million shares of Waste Management Common Stock must
be issued to reverse certain share repurchases effected by Waste Management.
Assuming that 20 million shares were issued at an offering price of $32 per
share and net issuance costs of 4%, net proceeds to Waste Management would be
$614,400,000. The proceeds from the sale of stock, after payment of dividends on
such stock based on the historical dividend rate, are assumed to be used to
reduce outstanding indebtedness at an average borrowing rate of 6%. The
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<PAGE>
3. PRO FORMA EFFECT OF WASTE MANAGEMENT EQUITY OFFERING ON RESULTS OF OPERATIONS
(CONTINUED)
applicable tax rate is assumed to be 42%. The following table summarizes the pro
forma effect of the equity offering as if the offering has occurred at the
beginning of the periods presented in the Combined Unaudited Pro Forma Condensed
Statements of Operations:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- ----------------
1995 1996 1997 1998
---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Pro forma income (loss) from continuing operations...... $ 496,927 $ 291,453 $ (1,029,977) $ 179,272
Decrease in interest expense at a result of equity
offering, net of tax benefit.......................... 20,964 20,943 20,915 5,316
---------- ---------- ------------- --------
Pro forma income (loss) from continuing operations after
equity offering....................................... $ 517,891 $ 312,396 $ (1,009,062) $ 184,588
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Pro forma basic earnings per common share from
continuing operations after equity offering........... $ 1.02 $ 0.58 $ (1.80) $ 0.33
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Pro forma diluted earnings per common share from
continuing operations after equity offering........... $ 1.00 $ 0.57 $ (1.80) $ 0.32
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Weighted average number of common shares outstanding
after equity offering................................. 509,722 543,142 561,032 563,646
---------- ---------- ------------- --------
---------- ---------- ------------- --------
Weighted average number of common and potential dilutive
shares outstanding after equity offering.............. 527,801 552,451 561,032 588,840
---------- ---------- ------------- --------
---------- ---------- ------------- --------
</TABLE>
85
<PAGE>
DESCRIPTION OF USA WASTE CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
USA Waste authorized capital stock consists of 500,000,000 shares of USA
Waste Common Stock and 10,000,000 shares of Preferred Stock, $0.01 par value per
share ("USA Waste Preferred Stock"). If the Charter Proposal is approved at the
USA Waste Special Meeting, the number of authorized shares of USA Waste Common
Stock will be increased, as of the Effective Time, to 1,500,000,000.
COMMON STOCK
As of the USA Waste Record Date, there were [ ] outstanding shares of USA
Waste Common Stock held by approximately [ ] holders of record. The holders
of USA Waste 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 USA Waste Board is classified into three classes of approximately equal
size, one of which is elected each year. Accordingly, holders of a majority of
the USA Waste Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election. The holders of USA Waste
Common Stock are entitled to share ratably in all assets of USA Waste which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of USA Waste
Preferred Stock then outstanding. The holders of USA Waste Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of USA Waste Common Stock are fully paid and nonassessable. The rights,
preferences and privileges of holders of USA Waste Common Stock are subject to
the rights of the holders of shares of any series of USA Waste Preferred Stock
which USA Waste may issue in the future. USA Waste has never paid cash dividends
on the USA Waste Common Stock. The decision whether to apply legally available
funds to the payment of dividends on New Waste Management Common Stock will be
made by the New Waste Management Board from time to time in the exercise of its
business judgment. See "Market Price and Dividend Information -- Dividends--New
Waste Management Dividends." In addition, the rights of holders of USA Waste
Common Stock to receive dividends are limited by USA Waste's revolving credit
agreement, which provides that USA Waste 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 USA Waste for such fiscal year.
PREFERRED STOCK
Shares of USA Waste Preferred Stock may be issued from time to time in one
or more series and the USA Waste 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 USA Waste Preferred Stock. The
purpose of authorizing the USA Waste Board to determine such rights and
preferences is to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of USA Waste 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 USA Waste Common Stock and, under certain circumstances, make it more
difficult for a third party to gain control of USA Waste. As of the date of this
Joint Proxy Statement/Prospectus, there are no outstanding shares of USA Waste
Preferred Stock.
DGCL AND CERTAIN PROVISIONS OF THE USA WASTE CHARTER
USA Waste has included in the USA Waste Charter and Bylaws provisions to (i)
eliminate the personal liability of its directors 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
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<PAGE>
fullest extent permitted by Section 145 of the DGCL, including under
circumstances in which indemnification is otherwise discretionary. USA Waste
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 USA Waste Common Stock is Boston
EquiServe, L.P., Canton, Massachusetts.
87
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the Merger holders of Waste Management Common Stock will
become holders of USA Waste Common Stock. The following is a summary of certain
of the material differences between the rights of holders of USA Waste Common
Stock and the rights of holders of Waste Management Common Stock. Because both
USA Waste and Waste Management are organized under the laws of the State of
Delaware, such differences arise from differences between various provisions of
the USA Waste 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 USA Waste Common Stock and Waste Management Common Stock
under, and is qualified in its entirety by reference to, the DGCL and the
respective Charter and Bylaws of USA Waste and Waste Management. See
"Description of USA Waste Capital Stock" for a summary of certain other rights
relating to the USA Waste Common Stock.
NUMBER, CLASSIFICATION AND REMOVAL OF DIRECTORS
The number of directors of USA Waste shall be fixed by the USA Waste Board
and, unless approved by at least two-thirds of the incumbent directors of USA
Waste, shall be not less than three nor more than nine. The USA Waste Board is
divided into three classes serving staggered three-year terms and any one or
more of the directors of USA Waste 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. Waste Management's Bylaws provide
that the number of directors shall be fixed by the Waste Management Board and
shall be not less than five nor more than 15. The Charter of Waste Management
also provides that the Waste Management Board shall be divided into three
classes serving staggered three-year terms and that one or more of the directors
of Waste Management may be removed from office at any time, with cause, by the
holders of at least a majority of the shares then entitled to vote in an
election of directors.
ADVANCE NOTICE OF STOCKHOLDER PROPOSALS
The respective Bylaws of USA Waste and 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 USA Waste require that, for business to be
properly brought by a stockholder before an annual meeting, notice must be
received by the Secretary of USA Waste or the USA Waste Board not less than 120
days nor more than 150 days prior to the anniversary of the date USA Waste'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 USA Waste intends to distribute its proxy statement with
respect to such meeting.
To be timely with respect to a special meeting of USA Waste, a stockholder's
notice must be received by the Secretary of USA Waste or the USA Waste Board not
less than 60 nor more than 90 days prior to the date of the meeting. However, if
less than 70 days' notice of the date of the special meeting is given 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 following the
public announcement of the special meeting, whichever occurs first.
The Bylaws of Waste Management provide that for business to be properly
brought by a stockholder at an annual meeting, notice must be received by the
Secretary of Waste Management not less than 90 days nor more than 120 days prior
to the date of the previous year's annual meeting; PROVIDED, HOWEVER, that if
the date of an annual meeting differs from that of the previous year by more
than 30 days, notice by the stockholder must be so received not later than ten
days after notice of such meeting has been given (or
88
<PAGE>
such greater period of time as is set forth in such notice). The Bylaws of Waste
Management provide that written notice of a special meeting shall be given by
the Chairman of the Waste Management Board, the President or the Secretary of
Waste Management not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at the meeting. Business transacted
at any special meeting of the stockholders of Waste Management is limited to the
purposes stated in the notice.
VOTING REQUIREMENTS AND QUORUMS OF STOCKHOLDERS
The respective Bylaws of USA Waste and Waste Management provide that, at any
meeting of stockholders, the holders of a majority of the outstanding shares of
stock then issued, outstanding and entitled to vote shall constitute a quorum
for the transaction of any business. The Bylaws of USA Waste provide that, when
a quorum is present, all matters shall be decided by the affirmative vote of the
holders of shares of stock representing a majority of the voting power present
(in person or by proxy), except when a different vote is required by express
provision of law or by the USA Waste Charter. The USA Waste Charter requires
that holders of a majority of USA Waste's issued and outstanding stock entitled
to vote thereon approve any merger, consolidation, dissolution or sale of all or
substantially all of the assets of USA Waste. The Bylaws of Waste Management
provide that, when a quorum is present, all matters other than the election of
directors shall be decided by the vote of the holders of a majority of Waste
Management Common Stock having voting power present in person or represented by
proxy, unless a different vote is required by the DGCL or Waste Management's
Charter, in which case such express provision shall govern. See "--Transactions
with Interested Stockholders; DGCL Section 203", "--Certain Restrictions on
Repurchases of Securities" and "--Amendment of Charter and Bylaws".
RIGHT TO CALL SPECIAL MEETINGS
The Bylaws of USA Waste provide that special meetings of stockholders may be
called by the Chairman of the USA Waste Board, by the Chief Executive Officer of
USA Waste or by a majority of the directors.
The Bylaws of Waste Management provide that special meetings of stockholders
may be called by the Chairman of the Waste Management Board, by the President of
Waste Management or by the Secretary of Waste Management or by resolution of the
Waste Management Board.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
The USA Waste Charter is silent with respect to actions of stockholders by
written consent. Therefore, in accordance with the DGCL, stockholders of USA
Waste may take action by written consent.
The Waste Management Charter provides that no action required to be taken or
which may be taken at any annual or special meeting of stockholders of Waste
Management may be taken without a meeting.
TRANSACTIONS WITH INTERESTED STOCKHOLDERS; DGCL SECTION 203
Both USA Waste and Waste Management 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 date on which 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
89
<PAGE>
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 a least 66 2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder. A "business
combination" includes, among others, mergers, asset sales and other transactions
resulting in a financial benefit to the Interested Stockholder.
The Waste Management Charter provides that, in addition to any affirmative
vote of the directors or stockholders of Waste Management required by law or by
or pursuant to any other article of the Waste Management Charter, any business
combination with any interested stockholder (generally defined to mean any
beneficial owner of more than 5% of Waste Management Common Stock) that has not
been approved by the affirmative vote of a majority of the continuing directors
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of Waste Management Common Stock not held by such interested
stockholder. Such affirmative vote is required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be specified, by law or
any agreement with any national securities exchange or otherwise. This provision
of the Waste Management Charter does not apply to any stock repurchase by Waste
Management of shares of Waste Management Common Stock from an interested
stockholder. See "--Certain Restrictions on Repurchases of Securities".
The USA Waste Charter does not contain any comparable provision.
CERTAIN RESTRICTIONS ON REPURCHASES OF SECURITIES
In addition to any affirmative vote of the directors or stockholders of
Waste Management required by law or by the Waste Management Charter, the Waste
Management Charter provides that any "Stock Repurchase" (defined generally to
mean any repurchase by Waste Management of shares of Waste Management Common
Stock at a price in excess of their "fair market value") by Waste Management of
any shares of Waste Management Common Stock from any stockholder of Waste
Management that is the beneficial owner of greater than 5% of the Waste
Management Common Stock or beneficially owned greater than 5% of the Waste
Management Common Stock within two years of the Stock Repurchase (an "Interested
Person") and certain affiliated persons, will, except as provided in the Waste
Management Charter, require the affirmative vote of the holders of at least a
majority of the voting power of the then outstanding shares of Waste Management
Common Stock entitled to vote generally in the election of directors, excluding
shares of Waste Management Common Stock with respect to which such Interested
Person is the beneficial owner. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or otherwise; PROVIDED, that no such
affirmative vote shall be required with respect to any purchase or other
acquisition of Waste Management Common Stock made (a) as part of a tender or
exchange offer by Waste Management to purchase Waste Management Common Stock
made on the same terms to all holders of Waste Management Common Stock and
complying with the applicable requirements of the Exchange Act, or (b) pursuant
to an open market purchase program by Waste Management approved by a majority of
the Waste Management Board if such purchase is effected on the open market and
is not the result of a privately negotiated transaction.
AMENDMENT OF CHARTER AND BYLAWS
AMENDMENT OF THE CHARTER. The USA Waste 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 capital stock of USA
Waste 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 repeal
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provisions in the USA Waste Charter that concern the size or classification of
the USA Waste Board, the removal of directors and the filling of vacancies on
the USA Waste Board.
The Waste Management Charter provides that the amendment or repeal of
Articles Fifth (concerning classification of the Waste Management Board and
filling Waste Management Board vacancies), Sixth (concerning stockholder action
by written consent), Seventh (concerning approvals of certain stock repurchases
by Waste Management), Eighth (concerning approvals of certain business
transactions with any "Interested Stockholder"), Ninth (concerning the authority
of the Waste Management Board to determine compliance with Article Sixth,
Seventh, Eighth, Ninth and Tenth of the Waste Management Charter), Tenth
(setting forth defined terms applicable to Article Sixth, Seventh, Eighth, Ninth
and Tenth of the Waste Management Charter) or Twelfth (concerning
indemnification of directors) of the Waste Management Charter, or the adoption
of any provision inconsistent therewith, requires the approval of the holders of
shares representing at least 80% of the outstanding shares of Waste Management
Common Stock.
Waste Management has designated one series of preferred stock, par value
$1.00 per share (the "Waste Management Series A Preferred Stock"). As of the
date of the Joint Proxy Statement/Prospectus, no shares of Waste Management
Series A Preferred Stock are outstanding. The Certificate of Designation with
respect to the Waste Management Series A Preferred Stock provides that the Waste
Management Charter may not be amended in any manner which would materially
adversely alter the powers, preferences or special rights of the Waste
Management Series A Preferred Stock without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Waste Management Series A
Preferred Stock.
AMENDMENT OF THE BYLAWS. The USA Waste Board may adopt, amend or repeal the
Bylaws of USA Waste, 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 USA Waste Board and any powers thereby conferred may be amended,
altered or repealed by the stockholders.
The Bylaws of Waste Management may be altered, amended or repealed, or new
bylaws may be adopted, by the stockholders of Waste Management or by the Waste
Management Board if such business is properly brought before any regular meeting
of the stockholders or of the Waste Management Board or at any special meeting
of the stockholders or of the Waste Management Board if, in the case of a
special meeting, notice of such alteration, amendment, repeal or adoption of new
bylaws is contained in the notice of such special meeting.
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APPROVAL OF AMENDMENT TO THE USA WASTE AMENDED AND RESTATED
1993 STOCK INCENTIVE PLAN
USA Waste has for many years utilized stock incentives as part of its
overall compensation program. The USA Waste Board believes stock options and
stock-based incentives play an important role in attracting and retaining the
services of outstanding personnel and in encouraging such employees to have a
greater personal financial investment in USA Waste.
USA Waste stockholders approved the USA Waste 1993 Plan at the 1993 annual
meeting. In 1995, in connection with USA Waste's acquisition of Chambers, the
stockholders of USA Waste approved an amendment to the USA Waste 1993 Plan to
increase shares available for issuance thereunder from 1,000,000 to 4,000,000.
In 1996, in connection with USA Waste's acquisition of Western Waste Industries,
the stockholders of USA Waste approved an amendment to the USA Waste 1993 Plan
to increase shares available for issuance thereunder from 4,000,000 to
6,500,000. In May 1998, the stockholders of USA Waste approved an amendment to
the USA Waste 1993 Plan to increase shares available for issuance thereunder
from 6,500,000 to 16,500,000.
The USA Waste 1993 Plan permits the granting, either alone or in
combination, of "nonqualified" stock options that do not qualify for beneficial
treatment under the Code, incentive stock options under Section 422A of the
Code, reload options, alternate appreciation rights, limited rights and stock
bonuses. Grants may be made to officers, other employees and consultants of USA
Waste who are responsible for or contribute to the management, growth, success
and profitability of USA Waste and who are designated by the committee that
administers the USA Waste 1993 Plan. Jerome B. York, William E. Moffett and
Alexander W. Rangos are the current members of such committee.
Stock options permit the recipient to purchase shares of USA Waste Common
Stock at the fair market value, determined on the date of grant, regardless of
the fair market value on the date of exercise. The holder of an alternative
appreciation right is entitled to receive the excess of the fair market value on
the date of exercise over the grant price of the right. Stock bonuses may
provide the recipient all of the rights of a USA Waste stockholder, including
the right to vote the shares and receive dividends; however the stock may not be
transferred by the recipient until certain restrictions (as determined by the
committee) lapse.
Each stock option granted under the USA Waste 1993 Plan must be exercised
within ten years after the date of grant, unless earlier terminated in
connection with termination of employment, and becomes exercisable with respect
to 20% of the total number of shares subject to the option on each of the five
subsequent anniversaries of the date of grant.
The USA Waste Board has amended the USA Waste 1993 Plan to increase the
number of shares of USA Waste Common Stock authorized for granting of awards
thereunder from 16,500,000 to 26,500,000, and has directed that such amendment
be submitted for approval by a vote of USA Waste's stockholders. USA Waste
currently has approximately 220,000,000 shares outstanding and, if the Merger is
approved, will have approximately 570,000,000 shares outstanding. Prior to such
amendment and as of May 1, 1998, options to acquire approximately 10,800,000
shares of USA Waste Common Stock had been granted under the USA Waste 1993 Plan
and 5,700,000 shares remained available for future awards. As of April 30, 1998,
approximately 14,505,215 shares of Waste Management Common Stock were available
for future awards under the Waste Management 1997 Equity Incentive Plan;
following consummation of the Merger, grants will no longer be made under this
plan. The USA Waste Board believes stockholder approval of this amendment to the
USA Waste 1993 Plan is necessary to assure that an adequate number of shares of
USA Waste Common Stock will be available for future award grants in order to
provide appropriate incentives to employees of USA Waste (and employees of New
Waste Management upon consummation of the Merger).
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In addition to the overall limit on shares available for issuance under the
USA Waste 1993 Plan, in accordance with the requirements of Section 422 of the
Code, the USA Waste 1993 Plan limits the number of shares that may be subject to
incentive stock options to 16,500,000 shares. In accordance with the
requirements of the regulations under Section 162(m) of the Code, the USA Waste
1993 Plan limits the number of shares that may be granted to an individual
participant in any fiscal year to 1,500,000 shares.
NEW PLAN BENEFITS. Future grants to be made under the USA Waste 1993 Plan
will be authorized by the committee in its sole discretion. For this reason, it
is not possible to determine the benefits or amounts that will be received by
any particular employees or group of employees in the future.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
NONQUALIFIED STOCK OPTIONS. The grant of a nonqualified stock option will
not result in the recognition of taxable income by the participant or in a
deduction to USA Waste. Upon exercise, a participant will recognize ordinary
income in an amount equal to the excess of the fair market value of the stock
purchased over the exercise price. USA Waste is required to withhold tax on the
amount of income so recognized, and a tax deduction is allowable equal to the
amount of such income (subject to the satisfaction of certain conditions in the
case of options exercised by Section 162(m) officers). Gain or loss upon a
subsequent sale of any stock received upon the exercise of a nonqualified stock
option generally would be taxed as capital gain or loss (long-term or
short-term, depending upon the holding period of the stock sold). Certain
additional rules apply if the exercise price for an option is paid in shares
previously owned by the participant.
INCENTIVE STOCK OPTIONS. Upon the grant or exercise of an incentive stock
option within the meaning of Section 422 of the Code, no income will be realized
by the participant for federal income tax purposes and USA Waste will not be
entitled to any deduction. However, the excess of the fair market value of the
stock as of the date of exercise over the exercise price will constitute an
adjustment to taxable income for purposes of the alternative minimum tax. If the
shares of stock underlying an incentive stock option are not disposed of within
the one-year period beginning on the date of the transfer of such shares to the
participant, nor within the two-year period beginning on the date of grant of
the option, any profit realized by the participant upon the disposition of such
shares will be taxed as long-term capital gain and no deduction will be allowed
to USA Waste. If the shares are disposed of within the one-year period from the
date of transfer of such shares to the participant or within the two-year period
from the date of grant of the option, the excess of the fair market value of the
shares upon the date of exercise or, if less, the fair market value on the date
of disposition, over the exercise price will be taxable as ordinary income of
the participant at the time of disposition, and a corresponding deduction will
be allowed to USA Waste. Certain additional rules apply if the exercise price
for an option is paid in shares previously owned by the participant. If an
option that is intended to qualify as an incentive stock option is exercised by
a person who was not continually employed by USA Waste or certain of its
affiliates from the date of grant of such option to a date not more than three
months prior to such exercise (or one year if such person is disabled), then
such option will not qualify as an incentive stock option and will instead be
taxed as a nonqualified stock option, as described above.
THE FOREGOING DOES NOT CONSTITUTE A DEFINITIVE STATEMENT OF THE FEDERAL
INCOME TAX EFFECTS OF OPTIONS UNDER THE USA WASTE 1993 PLAN, AND EACH
PARTICIPANT IN THE USA WASTE 1993 PLAN SHOULD CONSULT WITH HIS OWN TAX ADVISOR
TO DETERMINE THE PARTICULAR TAX EFFECTS OF THE PROVISIONS DISCUSSED HEREIN.
RECOMMENDATION OF THE USA WASTE BOARD. THE USA WASTE BOARD RECOMMENDS THAT
USA WASTE STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE USA WASTE 1993
PLAN TO INCREASE THE NUMBER OF SHARES OF USA WASTE COMMON STOCK THAT MAY BE
ISSUED UNDER THE USA WASTE 1993 PLAN FROM 16,500,000 TO 26,500,000.
VOTE REQUIRED FOR APPROVAL. The affirmative vote of the holders of a
majority of the shares of USA Waste Common Stock present or represented by proxy
and entitled to vote at the USA Waste Special Meeting is required for approval
of the amendment to the USA Waste 1993 Plan.
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APPROVAL OF AMENDMENT TO THE USA WASTE 1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
USA Waste has for many years utilized stock incentives as part of its
overall compensation program. The USA Waste Board believes stock options and
stock-based incentives play an important role in attracting and retaining the
services of outstanding non-employee directors and in encouraging such directors
to have a greater personal financial investment in USA Waste.
The USA Waste stockholders initially approved the USA Waste 1996 Plan at the
1996 annual meeting. Prior thereto, non-employee directors of USA Waste received
automatic annual grants of stock options pursuant to the terms of the USA Waste
1993 Plan.
The USA Waste 1996 Plan provides that an option to purchase a total of
12,500 shares of USA Waste Common Stock will be automatically granted in January
of each year in which a director who is not an officer or full-time employee of
USA Waste or any of its subsidiaries is serving as a director. The USA Waste
Board committee administering the USA Waste 1996 Plan may, in its discretion,
provide for an annual option grant to purchase a different number of shares of
USA Waste Common Stock and for additional grants to eligible directors.
Stock options permit the recipient to purchase shares of USA Waste Common
Stock at the fair market value, determined on the date of grant, regardless of
the fair market value on the date of exercise. Each option is for a term of ten
years. Each option will become exercisable with respect to 20% of the total
number of shares subject to the option on each of the five subsequent
anniversaries of the date of grant.
The USA Waste Board has amended the USA Waste 1996 Plan to increase the
number of shares of USA Waste Common Stock authorized for granting of awards
under the USA Waste 1996 Plan from 400,000 to 1,400,000, and has directed that
such amendment be submitted for approval by a vote of USA Waste's stockholders.
At the time of the original approval of the USA Waste 1996 Plan, USA Waste had
approximately 66,000,000 shares outstanding. USA Waste currently has
approximately 220,000,000 shares outstanding and, if the Merger is approved,
will have approximately 570,000,000 shares outstanding. Prior to such amendment
and as of May 1, 1998, options to acquire approximately 295,000 shares of USA
Waste Common Stock had been granted under the USA Waste 1996 Plan and 105,000
shares remained available for future awards. As of April 30, 1998, approximately
84,000 shares of Waste Management Common Stock were available for future awards
under the Waste Management 1992 Stock Option Plan for Non-Employee Directors;
following consummation of the Merger, grants will no longer be made under this
plan. The USA Waste Board believes stockholder approval of this amendment to the
USA Waste 1996 Plan is necessary to assure that an adequate number of shares of
USA Waste Common Stock will be available for future award grants in order to
provide appropriate incentives to non-employee directors of USA Waste (and of
New Waste Management upon consummation of the Merger).
All options granted under the USA Waste 1996 Plan are nonqualified options
not entitled to special tax treatment under Section 422 of the Code. For a
discussion of certain tax consequences of options, see "Approval of Amendment to
the USA Waste Amended and Restated 1993 Stock Incentive Plan--Certain Federal
Income Tax Consequences of Options" above.
RECOMMENDATION OF THE USA WASTE BOARD. THE USA WASTE BOARD RECOMMENDS THAT
USA WASTE STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE USA WASTE 1996
PLAN TO INCREASE THE NUMBER OF SHARES OF USA WASTE COMMON STOCK THAT MAY BE
ISSUED UNDER THE USA WASTE 1996 PLAN FROM 400,000 TO 1,400,000.
VOTE REQUIRED FOR APPROVAL. The affirmative vote of the holders of a
majority of the shares of USA Waste Common Stock present or represented by proxy
and entitled to vote at the USA Waste Special Meeting is required for approval
of the amendment to the USA Waste 1996 Plan.
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STOCKHOLDER PROPOSALS
The USA Waste Board will consider proposals of stockholders intended to be
presented for action at USA Waste's (or, if the Merger is consummated, New Waste
Management's) 1999 annual meeting of stockholders. A stockholder proposal must
be submitted in writing and be received at USA Waste's principal executive
offices, 1001 Fannin, Suite 4000, Houston, Texas 77002, Attn: Corporate
Secretary no later than December 9, 1998, to be considered for inclusion in USA
Waste's proxy statement relating to the 1999 annual meeting of stockholders.
If the Merger is not consummated, Waste Management will hold a 1998 Annual
Meeting of Stockholders. If such meeting is held, stockholder proposals intended
to be presented at such meeting must be received by Waste Management a
reasonable time before the solicitation of proxies for such meeting is made for
inclusion in Waste Management's proxy materials for such 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 USA Waste by Shearman & Sterling. Certain legal matters in connection with
the federal income tax consequences of the Merger will be passed upon for Waste
Management by Skadden, Arps, Slate, Meagher & Flom (Illinois), Waste
Management's special outside counsel in connection with the Merger.
EXPERTS
The consolidated balance sheets of USA Waste as of December 31, 1997 and
1996 and the consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Joint Proxy Statement/Prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of Waste Management incorporated by
reference in Waste Management's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 have been audited by Arthur Andersen, independent
auditors, as stated in their report thereon and incorporated herein by
reference. Such consolidated financial statements have been incorporated herein
by reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
USA Waste and Waste Management 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 USA Waste and Waste Management 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. In addition, USA Waste and Waste
Management 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. USA Waste Common Stock and Waste Management Common Stock are listed
on the NYSE. Reports and other information concerning USA Waste and Waste
Management can also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005. Waste Management Common Stock is also listed on the
Chicago Stock Exchange and reports and other information concerning Waste
Management can also be inspected at the offices of the Chicago Stock Exchange, 1
Financial Place, 440 S. LaSalle Street, Chicago, Illinois 60605.
USA Waste has filed with the Commission a Registration Statement on Form S-4
under the Exchange Act with respect to the shares of USA Waste Common Stock to
be issued pursuant to the Merger Agreement. This Joint Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement. For further information with respect to USA Waste, Waste
Management and the USA Waste 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
Joint 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 Joint Proxy Statement/ Prospectus
or in any document incorporated by reference in this Joint 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 Joint Proxy
Statement/Prospectus. This Joint Proxy Statement/Prospectus incorporates by
reference the documents set forth below that USA Waste and Waste Management have
previously filed with the Commission. These documents contain important
information about USA Waste and Waste Management and their finances.
<TABLE>
<CAPTION>
USA WASTE COMMISSION FILINGS
(FILE NO. 1-12154) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Quarterly period ended March 31, 1998
Current Report on Form 8-K Event Dated March 10, 1998
Description of USA Waste's capital stock contained in Dated July 1, 1993 and amended July 13, 1995
USA Waste's Registration Statement on Form 8-A, as
amended by Form 8-B
</TABLE>
<TABLE>
<CAPTION>
WASTE MANAGEMENT, INC. COMMISSION FILINGS
(FILE NO. 1-7327) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Report on Form 10-Q Quarterly period ended March 31, 1998
Current Reports on Form 8-K Events Dated January 5, 1998, January 29, 1998, February
24, 1998, March 11, 1998
and May 15, 1998
</TABLE>
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All documents and reports subsequently filed by USA Waste or Waste
Management pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Joint Proxy Statement/ Prospectus and prior to the date
of the USA Waste Special Meeting and the Waste Management Special Meeting shall
be deemed to be incorporated by reference in this Joint 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 Joint 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
Joint 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 Joint Proxy Statement/Prospectus is
delivered, on written or oral request, without charge, in the case of documents
relating to USA Waste, directed to USA Waste Services, Inc., 1001 Fannin, Suite
4000, Houston, Texas 77002 (telephone number (713) 512-6200), Attention:
Secretary, or, in the case of documents relating to Waste Management, directed
to Waste Management, Inc., 3003 Butterfield Road, Oak Brook, Illinois, 60523
(telephone number (630) 572-8800), Attention: Secretary, or to Waste Management
Shareholder Services, P.O. Box 1400, Pittsburgh, Pennsylvania 15230 (telephone
number (800) 443-6474). In order to ensure timely delivery of any of such
documents, any request should be made by July 8, 1998.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT 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 USA WASTE,
WASTE MANAGEMENT OR ANY OTHER PERSON. THIS JOINT 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 JOINT 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 USA WASTE
OR WASTE MANAGEMENT SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
<TABLE>
<S> <C>
By Order of the Board of Directors of USA By Order of the Board of Directors of Waste
Waste Services, Inc. Management, Inc.
Gregory T. Sangalis Herbert A. Getz
Vice President and Secretary Senior Vice President and Secretary
</TABLE>
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ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
USA WASTE SERVICES, INC.,
DOME MERGER SUBSIDIARY, INC.,
AND
WASTE MANAGEMENT, INC.
DATED AS OF MARCH 10, 1998
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
1.01. The Merger....................................................................................... A-1
1.02. Closing.......................................................................................... A-2
1.03. Effective Time................................................................................... A-2
1.04. Effect of the Merger............................................................................. A-2
1.05. Certificate of Incorporation; Bylaws; Directors and Officers of Surviving Corporation............ A-2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.01. Conversion of Securities......................................................................... A-2
2.02. Exchange of Certificates......................................................................... A-3
2.03. Stock Transfer Books............................................................................. A-6
2.04. Options to Purchase Company Common Stock......................................................... A-6
2.05. Restricted Stock................................................................................. A-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization and Qualification; Subsidiaries..................................................... A-7
3.02. Certificate of Incorporation and Bylaws.......................................................... A-7
3.03. Capitalization................................................................................... A-8
3.04. Authority Relative to this Agreement............................................................. A-8
3.05. No Conflict; Required Filings and Consents....................................................... A-9
3.06. Permits; Compliance with Laws.................................................................... A-9
3.07. SEC Filings; Financial Statements................................................................ A-10
3.08. Absence of Certain Changes or Events............................................................. A-11
3.09. Employee Benefit Plans; Labor Matters............................................................ A-11
3.10. Accounting and Tax Matters....................................................................... A-13
3.11. Contracts; Company Debt Instruments.............................................................. A-13
3.12. Litigation....................................................................................... A-13
3.13. Environmental Matters............................................................................ A-14
3.14. Taxes............................................................................................ A-15
3.15. Pooling Affiliates............................................................................... A-15
3.16. Non-Competition Agreements....................................................................... A-15
3.17. Opinion of Financial Advisor..................................................................... A-16
3.18. Brokers.......................................................................................... A-16
3.19. Insurance........................................................................................ A-16
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
4.01. Organization and Qualification; Subsidiaries..................................................... A-16
4.02. Certificate of Incorporation and Bylaws.......................................................... A-16
4.03. Capitalization................................................................................... A-17
4.04. Authority Relative to this Agreement............................................................. A-17
4.05. No Conflict; Required Filings and Consents....................................................... A-18
4.06. Permits; Compliance with Laws.................................................................... A-18
4.07. SEC Filings; Financial Statements................................................................ A-19
4.08. Absence of Certain Changes or Events............................................................. A-19
4.09. Employee Benefit Plans; Labor Matters............................................................ A-20
4.10. Accounting and Tax Matters....................................................................... A-21
4.11. Contracts; Parent Debt Instruments............................................................... A-21
4.12. Litigation....................................................................................... A-21
4.13. Environmental Matters............................................................................ A-22
4.14. Taxes............................................................................................ A-22
4.15. Pooling Affiliates............................................................................... A-23
4.16. Non-Competition Agreements....................................................................... A-23
4.17. Opinion of Financial Advisor..................................................................... A-23
4.18. Brokers.......................................................................................... A-23
4.19. Insurance........................................................................................ A-23
4.20. Ownership of Merger Sub; No Prior Activities..................................................... A-23
ARTICLE V
COVENANTS
5.01. Conduct of Business by the Company Pending the Closing........................................... A-24
5.02. Conduct of Business by Parent Pending the Closing................................................ A-25
5.03. Cooperation...................................................................................... A-27
5.04. Notices of Certain Events........................................................................ A-27
5.05. Access to Information; Confidentiality........................................................... A-27
5.06. No Solicitation of Transactions.................................................................. A-27
5.07. Pooling Matters.................................................................................. A-28
5.08. Letters of Accountants........................................................................... A-29
5.09. Plan of Reorganization........................................................................... A-29
5.10. Subsequent Financial Statements.................................................................. A-29
5.11. Control of Operations............................................................................ A-30
5.12. Further Action; Consents; Filings................................................................ A-30
5.13. Stockholder Rights Plan.......................................................................... A-31
5.14. Employee Benefit Plans........................................................................... A-31
</TABLE>
ii
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Registration Statement; Joint Proxy Statement.................................................... A-32
6.02. Stockholders' Meetings........................................................................... A-34
6.03. Post-Merger Directors and Chief Executive Officer of Parent...................................... A-34
6.04. Pooling Affiliates............................................................................... A-34
6.05. Assumption of Debt............................................................................... A-35
6.06. Indemnification of Directors and Officers........................................................ A-35
6.07. No Shelf Registration............................................................................ A-36
6.08. Public Announcements............................................................................. A-36
6.09. Parent Restated Certificate of Incorporation..................................................... A-36
6.10. Stock Exchange Listing........................................................................... A-36
6.11. Blue Sky......................................................................................... A-36
ARTICLE VII
CONDITIONS TO THE MERGER
7.01. Conditions to the Obligations of Each Party to Consummate the Merger............................. A-37
7.02. Conditions to the Obligations of the Company..................................................... A-37
7.03. Conditions to the Obligations of Parent.......................................................... A-38
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01. Termination...................................................................................... A-39
8.02. Effect of Termination............................................................................ A-41
8.03. Amendment........................................................................................ A-41
8.04. Waiver........................................................................................... A-41
8.05. Fees and Expenses................................................................................ A-41
ARTICLE IX
GENERAL PROVISIONS
9.01. Non-Survival of Representations and Warranties................................................... A-43
9.02. Notices.......................................................................................... A-43
9.03. Certain Definitions.............................................................................. A-44
9.04. Severability..................................................................................... A-44
9.05. Assignment; Binding Effect; Benefit.............................................................. A-44
9.06. Incorporation of Exhibits........................................................................ A-45
9.07. Specific Performance............................................................................. A-45
9.08. Governing Law.................................................................................... A-45
9.09. Consent to Jurisdiction; Venue................................................................... A-45
9.10. Headings......................................................................................... A-45
9.11. Counterparts..................................................................................... A-45
9.12. Entire Agreement................................................................................. A-45
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
- ----------------------------
<S> <C>
EXHIBIT 6.04(a) Form of Company Affiliate Letter
EXHIBIT 6.04(b) Form of Parent Affiliate Letter
</TABLE>
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<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Acquired Company Conversions............................................................... Section 4.03
affiliate.................................................................................. Section 9.03(a)
Agreement.................................................................................. Preamble
Arthur Andersen............................................................................ Section 3.10(b)
beneficial owner........................................................................... Section 9.03(b)
Blue Sky Laws.............................................................................. Section 3.05(b)
business day............................................................................... Section 9.03(c)
CERCLA..................................................................................... Section 3.13(d)
Certificate Amendment...................................................................... Section 4.04
Certificate of Merger...................................................................... Section 1.03
Certificates............................................................................... Section 2.02(b)
Closing.................................................................................... Section 1.02
Code....................................................................................... Recitals
Company.................................................................................... Preamble
Company 1996 10-K.......................................................................... Section 3.11
Company Affiliate Letter................................................................... Section 6.04(a)
Company Benefit Plans...................................................................... Section 3.09(a)
Company Common Stock....................................................................... Recitals
Company Designees.......................................................................... Section 6.03
Company Disclosure Schedule................................................................ Section 3.01
Company Foreign Benefit Plan............................................................... Section 3.09(c)
Company Indentures......................................................................... Section 6.05
Company Material Adverse Effect............................................................ Section 3.01
Company Material Contract.................................................................. Section 3.11
Company Permits............................................................................ Section 3.06
Company Preferred Stock.................................................................... Section 3.03
Company Reports............................................................................ Section 3.07(a)
Company Stock Options...................................................................... Section 2.04
Company Stock Plans........................................................................ Section 3.03
Company Stockholders' Meeting.............................................................. Section 6.01(a)
Company Subordinated Notes................................................................. Section 3.03
Company Subsidiaries....................................................................... Section 3.01
Company Termination Fee.................................................................... Section 8.05(b)
Competing Transaction...................................................................... Section 5.06(b)
Confidentiality Agreement.................................................................. Section 5.05(b)
Coopers & Lybrand.......................................................................... Section 4.10(b)
DGCL....................................................................................... Recitals
DLJ........................................................................................ Section 4.17
$.......................................................................................... Section 9.03(d)
Effective Time............................................................................. Section 1.03
Environmental Laws......................................................................... Section 3.13(d)
Environmental Permits...................................................................... Section 3.13(d)
ERISA...................................................................................... Section 3.09(a)
Excess Shares.............................................................................. Section 2.02(e)(ii)
Exchange Act............................................................................... Section 3.05(b)
Exchange Agent............................................................................. Section 2.02(a)
Exchange Fund.............................................................................. Section 2.02(a)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Exchange Ratio............................................................................. Section 2.01(a)
Expenses................................................................................... Section 8.05(a)
Government Antitrust Entity................................................................ Section 5.12(b)
Governmental Entity........................................................................ Section 3.05(b)
Governmental Order......................................................................... Section 9.03(e)
Hazardous Materials........................................................................ Section 3.13(d)
HSR Act.................................................................................... Section 3.05(b)
Indemnified Parties........................................................................ Section 6.06(b)
Insurance Amount........................................................................... Section 6.06(c)
IRS........................................................................................ Section 3.09(a)
Joint Proxy Statement...................................................................... Section 6.01(a)
knowledge.................................................................................. Section 9.03(f)
Law........................................................................................ Section 3.06
Lehman..................................................................................... Section 4.18
Merger..................................................................................... Recitals
Merger Sub................................................................................. Preamble
Merger Sub Common Stock.................................................................... Section 2.01(c)
Merrill Lynch.............................................................................. Section 3.17
NSC........................................................................................ Section 3.01
NYSE....................................................................................... Section 2.02(e)(ii)
Parent..................................................................................... Preamble
Parent 1996 10-K........................................................................... Section 4.02
Parent Affiliate Letter.................................................................... Section 6.04(b)
Parent Benefit Plans....................................................................... Section 4.09(a)
Parent Common Stock........................................................................ Recitals
Parent Disclosure Schedule................................................................. Section 4.01
Parent Foreign Benefit Plan................................................................ Section 4.09(c)
Parent Material Adverse Effect............................................................. Section 4.01
Parent Material Contract................................................................... Section 4.11
Parent Permits............................................................................. Section 4.06
Parent Preferred Stock..................................................................... Section 4.03
Parent Reports............................................................................. Section 4.07(a)
Parent Stock Options....................................................................... Section 4.03
Parent Stock Plans......................................................................... Section 4.03
Parent Stockholders' Meeting............................................................... Section 6.01(a)
Parent Subordinated Notes.................................................................. Section 4.03
Parent Subsidiaries........................................................................ Section 4.01
Parent Termination Fee..................................................................... Section 8.05(c)
person..................................................................................... Section 9.03(g)
Pooling Affiliate.......................................................................... Section 3.15
Registration Statement..................................................................... Section 6.01(a)
Regulations................................................................................ Recitals
Relational................................................................................. Section 4.18
Reporting Company Subsidiaries............................................................. Section 3.07(a)
Reporting Parent Subsidiaries.............................................................. Section 4.07(a)
Representatives............................................................................ Section 5.05(a)
SEC........................................................................................ Recitals
Securities Act............................................................................. Section 3.05(b)
SERP....................................................................................... Section 5.14(c)
Share Issuance............................................................................. Section 4.04
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
S-3 Registration Statement................................................................. Section 5.07(c)
Stockholders' Meetings..................................................................... Section 6.01(a)
subsidiary or subsidiaries................................................................. Section 9.03(h)
Surviving Corporation...................................................................... Section 1.01
Taxes...................................................................................... Section 3.14(a)
Terminating Company Breach................................................................. Section 8.01(g)
Terminating Parent Breach.................................................................. Section 8.01(h)
U.S. GAAP.................................................................................. Section 3.07(b)
WME........................................................................................ Section 3.01
WMI Merger Sub............................................................................. Section 5.07(b)
WTI........................................................................................ Section 5.07(b)
WTI Stock Plans............................................................................ Section 5.07(b)
</TABLE>
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AGREEMENT AND PLAN OF MERGER, dated as of March 10, 1998 (this "AGREEMENT"),
among USA WASTE SERVICES, INC., a Delaware corporation ("PARENT"), DOME MERGER
SUBSIDIARY, INC., a Delaware corporation and a wholly owned subsidiary of Parent
("MERGER SUB"), and WASTE MANAGEMENT, INC., a Delaware corporation (the
"COMPANY").
WITNESSETH:
WHEREAS, the boards of directors of Parent and the Company have determined
that it is consistent with and in furtherance of their respective long-term
business strategies and fair to and in the best interests of their respective
companies and stockholders to combine their respective businesses pursuant to
the transaction set forth in this Agreement;
WHEREAS, the board of directors of each of Parent, Merger Sub and the
Company have approved and declared advisable the merger of Merger Sub with and
into the Company (the "MERGER"), upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL");
WHEREAS, the board of directors of Parent has approved this Agreement and
the Merger and the issuance of common stock, par value $.01 per share, of Parent
("PARENT COMMON STOCK"), and the amendments to the Restated Certificate of
Incorporation of Parent, all as contemplated by this Agreement, and has
recommended that the holders of Parent Common Stock vote to approve the issuance
of Parent Common Stock and the amendments to the Restated Certificate of
Incorporation of Parent as contemplated by this Agreement;
WHEREAS, the board of directors of the Company has approved this Agreement
and the Merger, as contemplated by this Agreement, and has recommended that the
holders of common stock, par value $1.00 per share, of the Company ("COMPANY
COMMON STOCK"), vote to adopt this Agreement and the terms of the Merger as
contemplated by this Agreement;
WHEREAS, the board of directors of Merger Sub has approved this Agreement
and the Merger, as contemplated by this Agreement, and has recommended that its
sole stockholder vote to adopt this Agreement and the terms of the Merger, and
Parent, as the sole stockholder of Merger Sub, has adopted this Agreement and
terms of the Merger, as contemplated by this Agreement;
WHEREAS, the parties hereto intend that the Merger shall be accounted for as
a "pooling of interests" for financial reporting purposes under applicable
United States accounting rules and the accounting standards of the United States
Securities and Exchange Commission (the "SEC"); and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization under the provisions of Section
368(a) of the United States Internal Revenue Code of 1986, as amended (the
"CODE"), and the Treasury regulations thereunder (the "REGULATIONS");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the Effective Time
(as defined below), Merger Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation of the Merger as a
wholly owned subsidiary of Parent (the "SURVIVING CORPORATION").
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SECTION 1.02. CLOSING. Unless this Agreement shall have been terminated and
the Merger herein contemplated shall have been abandoned pursuant to Section
8.01 and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the consummation of the Merger shall take place as promptly as
practicable (and in any event within three business days) after satisfaction or
waiver of the conditions set forth in Article VII, at a closing (the "CLOSING")
to be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, New York, unless another date, time or place is agreed to by Parent and
the Company.
SECTION 1.03. EFFECTIVE TIME. At the time of the Closing, the parties shall
cause the Merger to be consummated by filing a certificate of merger (the
"CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware,
in such form as required by, and executed in accordance with the relevant
provisions of, the DGCL (the date and time of such filing, or such later date or
time as set forth therein, being the "EFFECTIVE TIME").
SECTION 1.04. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.05. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION. At the Effective Time:
(a) the Certificate of Incorporation and the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation (except that
Article I of the Certificate of Incorporation shall be amended as of the
Effective Time to read as follows: "The name of the Corporation is Waste
Management, Inc.");
(b) the officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation from and after
the Effective Time, in each case until their successors are elected or
appointed and qualified or until their resignation or removal. If, at the
Effective Time, a vacancy shall exist in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by
Law and the Certificate of Incorporation and Bylaws of the Surviving
Corporation; and
(c) the directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation from and after
the Effective Time, in each case until their successors are elected or
appointed and qualified or until their resignation or removal. If, at the
Effective Time, a vacancy shall exist on the Board of Directors of the
Surviving Corporation, such vacancy may thereafter be filled in the manner
provided by Law and the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the capital stock of Merger Sub or the Company:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Common Stock to be canceled pursuant to Section 2.01(b)) shall be converted,
subject to Section 2.02(e), into the right to receive 0.725 shares of Parent
Common Stock (the "EXCHANGE RATIO"); PROVIDED, HOWEVER, that, in any event,
if between the date of
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this Agreement and the Effective Time the outstanding shares of Parent
Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. All such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously representing any such shares shall
thereafter represent the right to receive a certificate representing the
shares of Parent Common Stock into which such Company Common Stock was
converted in the Merger. Certificates previously representing shares of
Company Common Stock shall be exchanged for certificates representing whole
shares of Parent Common Stock issued in consideration therefor upon the
surrender of such certificates in accordance with the provisions of Section
2.02, without interest. No fractional share of Parent Common Stock shall be
issued, and, in lieu thereof, a cash payment shall be made pursuant to
Section 2.02(e) hereof.
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any direct
or indirect wholly owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(c) Each share of common stock, par value $0.01 per share, of Merger Sub
("MERGER SUB COMMON STOCK") issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one newly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(d) For all purposes of this Agreement, unless otherwise specified, all
shares held by employee benefit plans of the Company (i) shall be deemed to
be issued and outstanding, (ii) shall not be deemed to be held in the
treasury of the Company and (iii) shall be converted into shares of Parent
Common Stock in accordance with Section 2.01(a).
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of the
Effective Time, Parent shall deposit, or shall cause to be deposited, with a
bank or trust company designated by Parent and reasonably acceptable to the
Company (the "EXCHANGE AGENT"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II, through
the Exchange Agent, certificates representing the shares of Parent Common Stock
(such certificates for shares of Parent Common Stock, together with cash in lieu
of fractional shares and any dividends or distributions with respect thereto,
being hereinafter referred to as the "EXCHANGE FUND") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Company Common Stock. The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the Parent
Common Stock contemplated to be issued pursuant to Section 2.01 out of the
Exchange Fund. Except as contemplated by Section 2.02(e) hereof, the Exchange
Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent shall
instruct the Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "CERTIFICATES") (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive in
respect of the shares of Company Common Stock formerly
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<PAGE>
represented by such Certificate (after taking into account all shares of Company
Common Stock then held by such holder), cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.02(e)
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.02(c), and the Certificate so surrendered shall forthwith
be canceled. No interest will be paid or accrued on any cash in lieu of
fractional shares or on any unpaid dividends and distributions payable to
holders of Certificates. Notwithstanding anything to the contrary contained
herein, no certificate representing Parent Common Stock or cash in lieu of a
fractional share interest shall be delivered to a person who is a Pooling
Affiliate of Parent or the Company unless such affiliate has theretofore
executed and delivered to Parent the agreement referred to in Section 6.04(a).
In the event of a transfer of ownership of shares of Company Common Stock which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a transferee if the Certificate representing such shares of Company Common Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock, cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.02(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.02(c).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT COMMON STOCK.
No dividends or other distributions declared or made after the Effective Time
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section
2.02(e), until the holder of such Certificate shall surrender such Certificate.
Subject to the effect of escheat, tax or other applicable Laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) promptly, the amount of any cash payable with
respect to a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such whole shares of Parent Common
Stock.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. All shares of Parent Common
Stock issued upon conversion of the shares of Company Common Stock in accordance
with the terms hereof (including any cash paid pursuant to Section 2.02(c) or
(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, subject, however, to the
Surviving Corporation's obligation to pay dividends or make any other
distribution with respect to shares of Company Common Stock with a record date
prior to the Effective Time which have been declared or made by the Company on
such shares of Company Common Stock in accordance with the terms of this
Agreement (to the extent permitted under Section 5.01) prior to the date hereof
and which remain unpaid at the Effective Time.
(e) NO FRACTIONAL SHARES. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or 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.
(ii) 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 pursuant to Section
2.02(a) over (y) the aggregate number of full shares of Parent Common Stock
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to be distributed to holders of Company Common Stock pursuant to Section 2.02(b)
(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 (iii) of this Section 2.02(e).
(iii) 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 as part of the Exchange Fund. 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.
(iv) Notwithstanding the provisions of subsections (ii) and (iii) of this
Section 2.02(e), 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 Composite Transaction Tape 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 2.02(e)(iv).
(v) 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 subject to and in accordance with the
terms of Section 2.02(c).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for one year after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
Company Common Stock who have not theretofore complied with this Article II
shall thereafter look only to Parent for the shares of Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock to which they are
entitled pursuant to Section 2.02(e) and any dividends or other distributions
with respect to Parent Common Stock to which they are entitled pursuant to
Section 2.02(c), in each case, without any interest thereon.
(g) NO LIABILITY. Neither Parent nor the Company shall be liable to any
holder of shares of Company Common Stock for any such shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any abandoned property,
escheat or similar Law.
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(h) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond, in such reasonable amount as Parent may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Parent Common Stock, any cash in
lieu of fractional shares of Parent Common Stock to which the holders thereof
are entitled pursuant to Section 2.02(e) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.02(c), in each case, without any interest thereon.
(i) WITHHOLDING. Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Company Common Stock such amounts as Parent or the Exchange
Agent are required to deduct and withhold under the Code, or any provision of
state, local or foreign tax law, with respect to the making of such payment. To
the extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of Company Common Stock in respect of whom such
deduction and withholding was made by Parent or the Exchange Agent.
SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
certificates representing shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
shares of Company Common Stock except as otherwise provided herein or by Law. On
or after the Effective Time, any Certificates presented to the Exchange Agent or
Parent for any reason shall be converted into the shares of Parent Common Stock,
any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 2.02(c).
SECTION 2.04. OPTIONS TO PURCHASE COMPANY COMMON STOCK. (a) At the Effective
Time, each option or warrant granted by the Company to purchase shares of
Company Common Stock (the "COMPANY STOCK OPTIONS"), which is outstanding and
unexercised immediately prior to the Effective Time, shall be assumed by Parent
and converted into an option or warrant to purchase shares of Parent Common
Stock in such number and at such exercise price as provided below and otherwise
having the same terms and conditions as in effect immediately prior to the
Effective Time (except to the extent that such terms, conditions and
restrictions may be altered in accordance with their terms as a result of the
Merger contemplated hereby):
(i) the number of shares of Parent Common Stock to be subject to the
converted option or warrant shall be equal to the product of (x) the number
of shares of Company Common Stock subject to the original option or warrant
and (y) the Exchange Ratio;
(ii) the exercise price per share of Parent Common Stock under the
converted option or warrant shall be equal to (x) the exercise price per
share of Company Common Stock under the original option or warrant divided
by (y) the Exchange Ratio; and
(iii) upon each exercise of options or warrants by a holder thereof, the
aggregate number of shares of Parent Common Stock deliverable upon such
exercise shall be rounded down, if necessary, to the nearest whole share and
the aggregate exercise price shall be rounded up, if necessary, to the
nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code.
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(b) Parent shall take all corporate action necessary to reserve and make
available for issuance a sufficient number of shares of Parent Common Stock for
delivery under Company Stock Options assumed by Parent. At or prior to 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 such options and shall use its best 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 options remain outstanding.
SECTION 2.05. RESTRICTED STOCK. At the Effective Time, any restricted shares
of Company Common Stock awarded pursuant to any plan, arrangement or transaction
and outstanding immediately prior to the Effective Time shall be assumed by
Parent and converted into restricted shares of Parent Common Stock in accordance
with Section 2.01 hereof, subject to the same terms, conditions and restrictions
as in effect immediately prior to the Effective Time, except to the extent that
such terms, conditions and restrictions may be altered in accordance with their
terms as a result of the Merger contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and each subsidiary of the Company (the "COMPANY SUBSIDIARIES") has been
duly organized and is validly existing and in good standing (to the extent
applicable) under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite corporate 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, individually or in
the aggregate, have a Company Material Adverse Effect. Each of the Company and
each Company Subsidiary is duly qualified or licensed to do business, and is in
good standing (to the extent applicable), in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have any change in or effect on the business
of the Company and the Company Subsidiaries that is, or is reasonably likely to
be, materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of the Company and the Company Subsidiaries taken as a
whole (a "COMPANY MATERIAL ADVERSE EFFECT"). Section 3.01(a) of the Disclosure
Schedule delivered by the Company to Parent
prior to the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE")
sets forth a complete and correct list of all of the Company Subsidiaries other
than the subsidiaries of Waste Management International plc (together with its
subsidiaries, "WME"). Except as set forth in Section 3.01(b) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary (except for
WME and NSC Corporation and its subsidiaries (collectively, "NSC")) holds any
interest in any corporation, limited liability company, partnership, joint
venture or other legal entity of any kind.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The copy of the
Company's Restated Certificate of Incorporation that is incorporated by
reference as an exhibit to the Company's Form 10-Q for the period ending June
30, 1997 and the copy of the Company's Bylaws that is incorporated by reference
as an exhibit to the Company's Form 10-Q for the period ending September 30,
1997 are complete and correct copies thereof. Such Restated Certificate of
Incorporation and Bylaws are in full force and effect. The Company is not in
violation of any of the provisions of its Restated Certificate of Incorporation
or Bylaws.
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SECTION 3.03. CAPITALIZATION. The authorized capital stock of the Company
consists of 1,500,000,000 shares of Company Common Stock and 50,000,000 shares
of preferred stock, par value $1.00 per share (the "COMPANY PREFERRED STOCK").
As of December 31, 1997, (i) 507,101,774 shares of Company Common Stock were
issued (including treasury shares), all of which were validly issued, fully paid
and nonassessable, (ii) 2,500,000 shares of Series A Preferred Stock were
authorized, none of which were issued, (iii) 52,063,991 shares of Company Common
Stock were held in the treasury of the Company or by any direct or indirect
wholly owned Company Subsidiary (including those in the employee stock benefit
trust), (iv) 14,650,015 shares of Company Common Stock were reserved for future
issuance pursuant to the terms of the Company's Convertible Subordinated Notes
due 2005 and the Company's Liquid Yield Option Notes due 2001, 2010 and 2012
(together, the "COMPANY SUBORDINATED NOTES") and (v) 21,998,096 shares of
Company Common Stock were reserved for issuance pursuant to outstanding Company
Stock Options issued under the benefits plans set forth on Section 3.03(a) of
the Company Disclosure Schedule (the "COMPANY STOCK PLANS"). Between December
31, 1997 and the date of this Agreement, an aggregate of 10,000 Company Stock
Options have been granted, excluding Company Stock Options with respect to up to
5.3 million shares of Company Common Stock granted on March 9, 1998 under the
Company 1997 Equity Incentive Plan (the "MARCH 1998 OPTIONS"), and, since that
date, no awards of restricted stock have been made under the Company Stock
Plans, and, since that date, no shares of Company Common Stock (or securities
convertible into Company Common Stock) have been issued other than those shares
of Company Common Stock reserved for issuance as set forth in this Section 3.03.
Except for the Company Stock Options granted pursuant to the Company Stock Plans
and shares of Company Common Stock issuable pursuant to the Company Stock Plans
and upon the conversion of the Company Subordinated Notes or pursuant to
agreements or arrangements described in Section 3.03(a) of the Company
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company is a party or
by which the Company is bound relating to the issued or unissued capital stock
of the Company or any Company Subsidiary (other than WME and NSC) or obligating
the Company or any Company Subsidiary (other than WME and NSC) to issue or sell
any shares of capital stock of, or other equity interests in, the Company or any
Company Subsidiary (other than WME and NSC). The terms of each grant of a March
1998 Option provide that, as a condition to such grant, the optionee must waive
any rights thereunder arising as a result of any "change in control" of the
Company that may be caused by the Merger. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance prior to the Effective Time on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in Section 3.03(a) of the Company Disclosure Schedule, there
are no outstanding contractual obligations of the Company or any Company
Subsidiary (other than WME and NSC) to repurchase, redeem or otherwise acquire
any shares of Company Common Stock or any capital stock of any Company
Subsidiary. Except as disclosed in Section 3.03(a) of the Company Disclosure
Schedule, each outstanding share of capital stock of each Company Subsidiary is
duly authorized, validly issued, fully paid and nonassessable and each such
share owned by the Company or another Company Subsidiary is free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Company's or such other Company
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where the failure to own such shares free and clear would
not, individually or in the aggregate, have a Company Material Adverse Effect.
Except as set forth in Section 3.03(b) of the Company Disclosure Schedule or as
set forth in the Company Reports (as hereinafter defined), there are no material
outstanding contractual obligations of the Company or any Company Subsidiary
(other than WME and NSC) to provide funds to, or make any material investment
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary which is not wholly owned by the Company or in any other person.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger. The execution
and delivery of this Agreement by the Company and the
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consummation by the Company of the Merger contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Merger (other than, with respect to the Merger, the
adoption of this Agreement by the affirmative vote of a majority of the
outstanding shares of Company Common Stock entitled to vote with respect thereto
at the Company Stockholders' Meeting and the filing and recordation of the
Certificate of Merger as required by the DGCL). This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by the Company does not, and the performance by
the Company of its obligations hereunder and the consummation of the Merger will
not, (i) conflict with or violate any provision of the Restated Certificate of
Incorporation or Bylaws of the Company or any equivalent organizational
documents of any Company Subsidiary (other than WME and NSC), (ii) assuming that
all consents, approvals, authorizations and permits described in Section 3.05(b)
have been obtained and all filings and notifications described in Section
3.05(b) have been made, conflict with or violate any Law applicable to the
Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected or (iii) except as set
forth in Section 3.05(a) of the Company Disclosure Schedule, result in any
breach of or constitute a default (or an event which with the giving of notice
or lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, Company Permit, franchise or
other instrument or obligation, except, with respect to clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would neither, individually or in the aggregate, (A) have a Company
Material Adverse Effect nor (B) prevent or materially delay the performance by
the Company of its obligations pursuant to this Agreement or the consummation of
the Merger.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance by the Company of its obligations hereunder or the
consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by the Company with or notification by the
Company to, any United States federal, state or local or any supranational or
foreign governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or arbitral body (a "GOVERNMENTAL ENTITY"),
except (i) applicable requirements of the Securities Exchange Act of 1934, as
amended (together with the rules and regulations promulgated thereunder, the
"EXCHANGE ACT"), the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder, the "SECURITIES ACT"), state securities
or "blue sky" laws ("BLUE SKY LAWS"), the rules and regulations of the NYSE,
state takeover laws, the premerger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"), the filing and recordation of the
Certificate of Merger as required by the DGCL, and as set forth in Section
3.05(b) of the Company Disclosure Schedule, and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not (A) prevent or materially delay the performance by the
Company of its obligations pursuant to this Agreement and the consummation of
the Merger or (B) individually or in the aggregate have a Company Material
Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE WITH LAWS. Each of the Company and the
Company Subsidiaries (other than WME) is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for the Company or any Company Subsidiary (other than WME) to own,
lease and operate its properties or to carry on its business as it is now being
conducted (the "COMPANY PERMITS"), and all such Company Permits are valid and in
full force and effect, except where the failure to have, or the suspension or
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cancellation of, any of the Company Permits, or the failure of any of such
Company Permits to be valid and in full force and effect, would not,
individually or in the aggregate, (i) have a Company Material Adverse Effect, or
(ii) except as described in Section 3.05(b) of the Company Disclosure Schedule,
prevent or materially delay the performance by the Company of its obligations
pursuant to this Agreement and the consummation of the Merger, and, as of the
date of this Agreement, no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened, except where
the failure to have, or the suspension or cancellation of, any of the Company
Permits would not, individually or in the aggregate, (i) have a Company Material
Adverse Effect or (ii) prevent or materially delay the performance by the
Company of its obligations pursuant to this Agreement and the consummation of
the Merger. Except as disclosed in Section 3.06(a) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary (other than WME) is in
conflict with, or in default or violation of, (i) any Law applicable to the
Company or any Company Subsidiary (other than WME) or by which any property or
asset of the Company or any Company Subsidiary (other than WME) is bound or
affected or (ii) any Company Permits, except in the case of clauses (i) and (ii)
for any such conflicts, defaults or violations that would neither individually
or in the aggregate, (A) have a Company Material Adverse Effect nor (B) prevent
or materially delay the performance by the Company of its obligations pursuant
to this Agreement and the consummation of the Merger. As used in this Agreement,
"LAW" means any federal, state or local statute, law, ordinance, regulation,
rule, code, order, judgment, writ, stipulation, award, injunction, decree or
other requirement or rule of law of the United States or any other jurisdiction.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Other than those listed
on Section 3.07(a)(i) of the Company Disclosure Schedule (the "REPORTING COMPANY
SUBSIDIARIES") and other than NSC, no Company Subsidiary is subject to the
periodic reporting requirements of the Exchange Act or required to file any
form, report or other document with the SEC, NYSE, any other stock exchange or
any other comparable Governmental Entity. The Company and each Reporting Company
Subsidiary has timely filed all periodic reports and all other documents
required to be filed by it with the SEC under the Exchange Act since December
31, 1996 through the date of this Agreement (collectively and as amended, the
"COMPANY REPORTS"). Except as set forth in Section 3.07(a)(iii) of the Company
Disclosure Schedule or except as would not have a Company Material Adverse
Effect, each Company Report (i) was prepared in accordance with the requirements
of the Exchange Act and (ii) did not at the time it was filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) Except as set forth on Section 3.07(b)(i) of the Company Disclosure
Schedule, each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company Reports was prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP") applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto) and each presented fairly, in all
material respects, the consolidated financial position of the Company and the
consolidated Company Subsidiaries (with respect to Company Reports filed by the
Company) or the consolidated financial position of the Reporting Company
Subsidiary (with respect to Company Reports filed by a Reporting Company
Subsidiary) as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a Company
Material Adverse Effect). The books and records of the Company and the Company
Subsidiaries (other than WME and NSC) are being maintained in accordance with
U.S. GAAP and any other applicable legal and accounting requirements.
(c) Except as and to the extent set forth on Section 3.07(c) of the Company
Disclosure Schedule, none of the Company or any Company Subsidiary (other than
WME and NSC) has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would result in the
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stockholders' equity of the Company as of December 31, 1997 as set forth in the
Company Reports not fairly reflecting the financial condition of the Company and
the Company Subsidiaries, taken as a whole, in accordance with U.S. GAAP, except
for liabilities or obligations incurred in the ordinary course of business since
January 1, 1998 that would not, individually or in the aggregate, have a Company
Material Adverse Effect, it being understood that for purposes of determining
whether a Company Material Adverse Effect shall have occurred on the assets,
liabilities, financial condition or results of operations of the Company and the
Company Subsidiaries taken as a whole, actual amounts as at any date of
determination or for any period of determination shall be compared, to the
extent practicable, to the corresponding amounts included in the Company's 1998
business plan included in Section 3.08 of the Company Disclosure Schedule.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1998,
except as contemplated by or as disclosed in this Agreement, as set forth in
Section 3.08 of the Company Disclosure Schedule or as disclosed in, reflected in
or contemplated by, any Company Reports filed since December 31, 1996, the
Company and the Company Subsidiaries (other than WME and NSC) have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been (i) any Company Material
Adverse Effect or any event or development that would have a Company Material
Adverse Effect, excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in conditions generally
applicable to the industries in which the Company and the Company Subsidiaries
are involved, it being understood that for purposes of determining whether a
Company Material Adverse Effect shall have occurred on the assets, liabilities,
financial condition or results of operations of the Company and the Company
Subsidiaries taken as a whole, actual amounts as at any date of determination or
for any period of determination shall be compared, to the extent practicable, to
the corresponding amounts included in the Company's 1998 business plan included
in Section 3.08 of the Company Disclosure Schedule, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of its
obligations pursuant to this Agreement and the consummation of the Merger by the
Company, (iii) except as required by law after the date of this Agreement, any
material change by the Company in its accounting methods, principles or
practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of Company Common Stock (other than
regular quarterly dividends not to exceed $0.17 per share) or any redemption,
purchase or other acquisition of any of the Company's securities or (v) except
with respect to WME and NSC, any increase in the compensation or benefits or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
payable to any executive officers of the Company or any Company Subsidiary
(other than WME and NSC) except in the ordinary course of business consistent
with past practice.
SECTION 3.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) With respect to
each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained or contributed to by the Company or any Company Subsidiary, or with
respect to which the Company or any Company Subsidiary (in each case, other than
WME and NSC) could incur liability under Section 4069, 4212(c) or 4204 of ERISA
(the "COMPANY BENEFIT PLANS"), the Company has delivered (or will, within 15
days of the date hereof, deliver) to Parent a true and correct copy of (i) such
Company Benefit Plan and the most recent summary plan description related to
each Company Benefit Plan for which a summary plan description is required, (ii)
each trust agreement or other funding arrangement relating to such Company
Benefit Plan, (iii) the most recent annual report (Form 5500) filed with the
Internal Revenue Service (the "IRS"), (iv) the most recent actuarial report or
financial statement relating to a Company Benefit Plan and (v) the most recent
determination letter issued by the IRS with respect to any Company Benefit Plan
qualified under Section 401(a) of the Code.
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(b) Each Company Benefit Plan has been administered in all material respects
in accordance with its terms and all contributions required to be made under the
terms of any of the Company Benefit Plans as of the date of this Agreement have
been timely made or have been reflected on the most recent consolidated balance
sheet filed or incorporated by reference in the Company Reports prior to the
date of this Agreement. Except as set forth in Section 3.09(b) of the Company
Disclosure Schedule, with respect to the Company Benefit Plans, no event has
occurred and, to the knowledge of the Company, there exists no condition or set
of circumstances in connection with which the Company or any Company Subsidiary
could be subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law which, in any case, would
individually or in the aggregate have a Company Material Adverse Effect.
(c) Except as set forth in Section 3.09(c) of the Company Disclosure
Schedule or except as would not have a Company Material Adverse Effect, with
respect to each Company Benefit Plan that is not subject to United States Law (a
"COMPANY FOREIGN BENEFIT PLAN"):
(i) all employer and employee contributions to each Company Foreign
Benefit Plan required by Law or by the terms of such Company Foreign Benefit
Plan have been made or, if applicable, accrued in accordance with normal
accounting practices and a PRO RATA contribution for the period from the
date hereof to and including the Effective Time has been made or accrued in
accordance with normal accounting principles;
(ii) the fair market value of the assets of each funded Company Foreign
Benefit Plan, the liability of each insurer for any Company Foreign Benefit
Plan funded through insurance or the book reserve established for any
Company Foreign Benefit Plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit obligations, as of
the Effective Time, with respect to all current and former participants in
such plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such Company Foreign
Benefit Plan and no transaction contemplated by this Agreement shall cause
such assets or insurance obligations to be less than such benefit
obligations; and
(iii) each Company Foreign Benefit Plan required to be registered has
been registered and has been maintained in good standing with the
appropriate regulatory authorities.
(d) As of the date of this Agreement, there is no labor dispute, strike or
work stoppage against the Company or any Company Subsidiary pending or, to the
knowledge of the Company, threatened which may interfere with the respective
business activities of the Company or any Company Subsidiary, except where such
dispute, strike or work stoppage would not have a Company Material Adverse
Effect. Except as set forth on Section 3.09(d) of the Company Disclosure
Schedule, as of the date of this Agreement, to the knowledge of the Company,
none of the Company, any Company Subsidiary, or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of the Company or any
Company Subsidiary, and there is no charge or complaint against the Company or
any Company Subsidiary by the National Labor Relations Board or any comparable
governmental agency pending or threatened in writing, except where such unfair
labor practice, charge or complaint would not have a Company Material Adverse
Effect.
(e) The Company has made available to Parent true and complete copies of (i)
all employment agreements with executive officers of the Company and with each
other officer of the Company and of each Company Subsidiary (other than NSC and,
except with respect to the chief executive officer thereof, WME) providing for
annual compensation in excess of $250,000, (ii) all severance plans, agreements,
programs and policies of the Company and each Company Subsidiary (other than WME
and NSC) with or relating to their respective employees, and (iii) all plans,
programs, agreements and other arrangements of the Company and each Company
Subsidiary (other than WME and NSC) with or relating to their respective
employees which contain "change of control" provisions.
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(f) Except as set forth in Section 3.09(f) of the Company Disclosure
Schedule, no amount paid or payable by the Company or any Company Subsidiary in
connection with the transactions contemplated hereby either solely as a result
thereof or as a result of such transactions in conjunction with any other events
will be an "excess parachute payment" within the meaning of Section 280G of the
Code.
(g) Except as provided in Section 3.09(g) of the Company Disclosure
Schedule, except as otherwise required by Law, and except for the Company
Foreign Benefit Plans, no Company Benefit Plan provides retiree medical or
retiree life insurance benefits to any person.
(h) The Company has agreed to continue Mr. Robert S. Miller's employment as
chairman and chief executive officer of the Company until the Effective Time and
Mr. Robert S. Miller has agreed, as of the date of this Agreement, to continue
to serve as such until the Effective Time.
SECTION 3.10. ACCOUNTING AND TAX MATTERS. (a) Except as disclosed in the
Company Reports or in Section 3.10 of the Company Disclosure Schedule, neither
the Company nor, to the knowledge of the Company, any of its affiliates has
taken or agreed to take any action (other than actions contemplated by this
Agreement) that would prevent the Merger from qualifying for "pooling of
interests" accounting treatment under applicable United States accounting rules,
including, without limitation, applicable SEC accounting standards, or would
prevent the Merger from constituting a transaction qualifying under Section
368(a) of the Code. The Company is not aware of any agreement, plan or other
circumstance that would prevent the Merger from so qualifying under Section
368(a) of the Code.
(b) The representations and warranties made in the Company's letter of
compliance with pooling of interest criteria addressed to Arthur Andersen LLP
("ARTHUR ANDERSEN") are true as of the date hereof.
(c) The Company has duly authorized amendments to the Company Stock Plans
set forth on Section 3.10(c) of the Company Disclosure Schedule so as to provide
that the Company (or, following the Effective Time, Parent) shall satisfy any
obligations it may have to repurchase a participant's exercisable but
unexercised options under such Company Stock Plan by issuing to such participant
shares of Company Common Stock (or, following the Effective Time, Parent Common
Stock), with a fair market value equal to the cash that would otherwise have
been payable thereunder.
SECTION 3.11. CONTRACTS; COMPANY DEBT INSTRUMENTS. Except as disclosed in
the Company Reports or in Section 3.11 of the Company Disclosure Schedule, there
is no contract or agreement that is material to the business, financial
condition or results of operations of the Company and the Company Subsidiaries
taken as a whole (each, a "COMPANY MATERIAL CONTRACT"). Except as disclosed in
the Company Reports or in Section 3.11 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary is in violation of or in default
under (nor does there exist any condition which with the passage of time or the
giving of notice would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture or lease, or any other
contract, agreement, arrangement or understanding to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate, result in a Company
Material Adverse Effect. Set forth in Section 3.11 of the Company Disclosure
Schedule is a description of indebtedness of the Company and the Company
Subsidiaries as of February 19, 1998.
SECTION 3.12. LITIGATION. Except as disclosed in the Company Reports or in
Section 3.12 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary before any Governmental
Entity that, individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect, and, except as disclosed to Parent, to the
knowledge of the Company, there are no existing facts or circumstances that
would be reasonably likely to result in such a suit, claim, action, proceeding
or investigation. Except as disclosed to Parent, the Company is not aware of any
facts or circumstances which would result in the denial of insurance coverage
under policies issued to the Company and the Company Subsidiaries in respect of
such suits, claims, actions, proceedings and investigations,
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except in any case as would not, individually or in the aggregate, have a
Company Material Adverse Effect. Except as disclosed in the Company Reports or
in Section 3.12 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary is subject to any outstanding order, writ, injunction or
decree which, insofar as can be reasonably foreseen, individually or in the
aggregate, would have a Company Material Adverse Effect.
SECTION 3.13. ENVIRONMENTAL MATTERS. Except as disclosed in the Company
Reports or in Section 3.13 of the Company Disclosure Schedule or as would not,
individually or in the aggregate, have a Company Material Adverse Effect:
(a) the Company and the Company Subsidiaries (other than WME) (i) are in
compliance with all, and are not subject to any asserted liability or, to
the Company's knowledge, any liability, in each case with respect to any,
applicable Environmental Laws (as defined below), (ii) hold or have applied
for all Environmental Permits (as defined below) and (iii) are in compliance
with their respective Environmental Permits;
(b) neither the Company nor any Company Subsidiary (other than WME) has
received any written notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries (other than
WME) may be in violation of, or liable under, any Environmental Law;
(c) neither the Company nor any Company Subsidiary (other than WME) (i)
has entered into or agreed to any consent decree or order or is subject to
any judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation, sampling,
monitoring, treatment, remediation, removal or cleanup of Hazardous
Materials (as defined below) and, to the knowledge of the Company, no
investigation, litigation or other proceeding is pending or threatened in
writing with respect thereto, or (ii) is an indemnitor in connection with
any threatened or asserted claim by any third-party indemnitee for any
liability under any Environmental Law or relating to any Hazardous
Materials;
(d) none of the real property owned or leased by the Company or any
Company Subsidiary (other than WME) is listed or, to the knowledge of the
Company, proposed for listing on the "National Priorities List" under
CERCLA, as updated through the date hereof, or any similar state or foreign
list of sites requiring investigation or cleanup; and
(e) the dollar amounts set forth in Section 3.13(e) of the Company
Disclosure Schedule represent the best estimates of the Company of all
reserves expected to be established by the Company as of December 31, 1997
for the Company's and the Company Subsidiaries' obligations and liabilities
pursuant to any Environmental Law (including, without limitation,
obligations and liabilities for the investigation and remediation of
Hazardous Materials and obligations and liabilities for the interim and
final closure and post closure of disposal facilities), and the accounting
policies and procedures used to determine such estimated reserves are in
compliance with U.S. GAAP.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended as of the date hereof.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, treaty, writ or order and any
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree, judgment, stipulation,
injunction, permit, authorization, policy, opinion, or agency requirement, in
each case having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and safety
or natural resources, including, without limitation, those relating to the use,
handling, presence, transportation, treatment, storage, disposal, release,
threatened release or discharge of Hazardous Materials or noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property or to
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the siting, construction, operation, closure and post-closure care of waste
disposal, handling and transfer facilities.
"ENVIRONMENTAL PERMITS" means any permit, approval, identification number,
license and other authorization required under any applicable Environmental Law.
"HAZARDOUS MATERIALS" means (a) any petroleum, petroleum products, by-
products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (b) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
SECTION 3.14. TAXES. (a) Except as set forth in Section 3.14 of the Company
Disclosure Schedule and except for such matters that, individually or in the
aggregate, would not have a Company Material Adverse Effect, (i) the Company and
each of the Company Subsidiaries have timely filed or shall timely file all
returns and reports required to be filed by them with any taxing authority with
respect to Taxes for any period ending on or before the Effective Time, taking
into account any extension of time to file granted to or obtained on behalf of
the Company and the Company Subsidiaries, (ii) all Taxes that are due prior to
the Effective Time have been paid or shall be paid on or before the applicable
due date, (iii) as of the date hereof, no deficiency for any amount of Tax has
been asserted or assessed by a taxing authority against the Company or any of
the Company Subsidiaries and (iv) the Company and each of the Company
Subsidiaries have provided adequate reserves in their financial statements for
any Taxes that have not been paid, whether or not shown as being due on any
returns. As used in this Agreement, "TAXES" shall mean any and all taxes, fees,
levies, duties, tariffs, imposts and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges.
(b) Except as set forth in Section 3.14 of the Company Disclosure Schedule,
to the best of the Company's knowledge, no Tax disputes or audits are pending
against, and no claims for Taxes have been received in writing by the Company or
any of the Company Subsidiaries, other than disputes, audits and claims that are
not reasonably likely to have a Company Material Adverse Effect.
(c) There are no Tax liens upon any property or assets of the Company or any
of the Company Subsidiaries except liens for current Taxes not yet due and liens
which have not had and are not reasonably likely to have a Company Material
Adverse Effect.
SECTION 3.15. POOLING AFFILIATES. Section 3.15 of the Company Disclosure
Schedule sets forth the names and addresses of those persons who are, in the
Company's reasonable judgment, "affiliates" within the meaning of Rule 145 of
the rules and regulations promulgated under the Securities Act or applicable SEC
accounting releases with respect to pooling of interests accounting treatment
(each such person, a "POOLING AFFILIATE") of the Company.
SECTION 3.16. NON-COMPETITION AGREEMENTS. Except as set forth on Section
3.16 of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary (other than WME and NSC) is a party to any agreement which purports
to restrict or prohibit in any material respect the Company and the Company
Subsidiaries collectively 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 any other wastes services businesses
currently engaged in by the Company, or any corporations affiliated with the
Company. None of the Company's officers, directors or key employees is a party
to any agreement which, by virtue of such
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person's relationship with the Company, restricts in any material respect the
Company or any Company Subsidiary or affiliate from, directly or indirectly,
engaging in any of the businesses described above.
SECTION 3.17. OPINION OF FINANCIAL ADVISOR. Merrill Lynch & Co., Inc.
("MERRILL LYNCH") has delivered to the board of directors of the Company its
written opinion to the effect that, as of the date of the opinion, the Exchange
Ratio was fair from a financial point of view to the holders of Company Common
Stock (other than Parent or its affiliates). Merrill Lynch has authorized the
inclusion of its opinion in the Joint Proxy Statement and the Company shall
promptly, after the date of this Agreement, deliver a signed copy of such
opinion to Parent.
SECTION 3.18. BROKERS. No broker, finder or investment banker (other than
Merrill Lynch) is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger based upon arrangements made by or on behalf of
the Company. The Company has heretofore made available to Parent complete and
correct copies of all agreements between the Company and Merrill Lynch pursuant
to which such firm would be entitled to any payment relating to the Merger.
SECTION 3.19. INSURANCE. Set forth on Schedule 3.19 of the Company
Disclosure Schedule is a description of material insurance policies maintained
by the Company with respect to the businesses of the Company and the Company
Subsidiaries (other than WME and NSC).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company that:
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent,
Merger Sub and each other subsidiary of Parent (together with Merger Sub, the
"PARENT SUBSIDIARIES") has been duly organized and is validly existing and in
good standing (to the extent applicable) under the laws of the jurisdiction of
its incorporation or organization, as the case may be, and has the requisite
corporate 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,
individually or in the aggregate, have a Parent Material Adverse Effect. Each of
Parent and each Parent Subsidiary is duly qualified or licensed to do business,
and is in good standing (to the extent applicable), in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have any change in or effect on the business
of Parent and the Parent Subsidiaries that is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of Parent and the Parent Subsidiaries taken as a whole (a
"PARENT MATERIAL ADVERSE EFFECT"). Section 4.01(a) of the Disclosure Schedule
delivered by Parent to the Company prior to the execution of this Agreement (the
"PARENT DISCLOSURE SCHEDULE") sets forth a complete and correct list of all of
Parent Subsidiaries. Except as set forth in Section 4.01(b) of the Parent
Disclosure Schedule, neither Parent nor any Parent Subsidiary holds any interest
in any corporation, limited liability company, partnership, joint venture or
other legal entity of any kind.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The copy of Parent's
Restated Certificate of Incorporation that is incorporated by reference as an
exhibit to Parent's Form 10-Q for the period ending September 30, 1997 and the
copy of Parent's Bylaws that is incorporated by reference as an exhibit to
Parent's Form 10-K for the period ending December 31, 1996 (the "PARENT 1996
10-K") are complete and correct copies thereof. Parent has heretofore furnished
to the Company a complete and correct copy of the Certificate of Incorporation
and Bylaws of Merger Sub. Such Restated Certificate of Incorporation,
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Certificate of Incorporation and Bylaws of Parent and Merger Sub are in full
force and effect. Neither Parent nor Merger Sub is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
SECTION 4.03. CAPITALIZATION. The authorized capital stock of Parent
consists of 500,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock (the "PARENT PREFERRED STOCK"). As of February 27, 1998, (i)
218,866,174 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable, (ii) no shares of
Parent Preferred Stock were authorized and outstanding, (iii) 23,485 shares of
Parent Common Stock were held in the treasury of Parent or by Parent
Subsidiaries, (iv) 15,542,075 shares of Parent Common Stock were reserved for
future issuance pursuant to the terms of Parent's Convertible Subordinated Notes
due 2002, Parent's 4 1/2% Convertible Subordinated Notes due 2001 and Parent's
5% Convertible Subordinated Notes due 2006 (together, the "PARENT SUBORDINATED
NOTES"), (v) 19,176,005 shares of Parent Common Stock were reserved for issuance
pursuant to outstanding options or warrants to purchase shares of Parent Common
Stock ("PARENT STOCK OPTIONS") issued under the benefits plans set forth on
Section 4.03(v) of the Parent Disclosure Schedule or otherwise (the "PARENT
STOCK PLANS") and (vi) 4,035,572 shares of Parent Common Stock were reserved for
issuance upon conversion of shares of acquired companies ("ACQUIRED COMPANY
CONVERSIONS"). Between February 27, 1998 and the date of this Agreement, no
Parent Stock Options have been granted and no awards have been made under Parent
Stock Plans, and no shares of Parent Common Stock (or securities convertible
into Parent Common Stock) have been issued other than those shares of Parent
Common Stock reserved for issuance as set forth in this Section 4.03. Except for
Parent Stock Options granted pursuant to Parent Stock Plans and shares of Parent
Common Stock issuable pursuant to Parent Stock Plans, upon Acquired Company
Conversions, and upon the conversion of the Parent Subordinated Notes or
pursuant to agreements or arrangements described in Section 4.03 of the Parent
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which Parent is a party or by
which Parent is bound relating to the issued or unissued capital stock of Parent
or any Parent Subsidiary or obligating Parent or any Parent Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, Parent or
any Parent Subsidiary. All shares of Parent Common Stock subject to issuance as
aforesaid, upon issuance prior to the Effective Time on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. Except as set forth in
Section 4.03 of the Parent Disclosure Schedule, there are no outstanding
contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem
or otherwise acquire any shares of Parent Common Stock or any capital stock of
any Parent Subsidiary. Except as disclosed in Section 4.03 of the Parent
Disclosure Schedule, each outstanding share of capital stock of each Parent
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by Parent or another Parent Subsidiary is free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or such other Parent Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever, except
where the failure to own such shares free and clear would not, individually or
in the aggregate, have a Parent Material Adverse Effect. Except as set forth in
Section 4.03 of the Parent Disclosure Schedule or as set forth in the Parent
Reports (as hereinafter defined), there are no material outstanding contractual
obligations of Parent or any Parent Subsidiary to provide funds to, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in, any Parent Subsidiary which is not wholly owned by Parent or in any other
person.
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Merger. Each of (i) the execution and delivery of this Agreement by Parent
and Merger Sub and the consummation by Parent and Merger Sub of the transactions
contemplated hereby, (ii) the amendment to the Restated Certificate of
Incorporation of Parent to increase the number of authorized shares of Parent
Common Stock to a number sufficient to consummate the transactions contemplated
hereby and to change Parent's name, as of the Effective Time, to "Waste
Management, Inc." (the "CERTIFICATE AMENDMENT") and (iii) the issuance (the
"SHARE ISSUANCE") of shares of Parent Common
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Stock in the Merger, have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of Parent or
Merger Sub are necessary to authorize this Agreement or to consummate such
transactions (other than, with respect to (a) the adoption of the Certificate
Amendment, the affirmative vote of a majority of the votes entitled to be cast
and (b) the adoption of the Share Issuance, the approval thereof by the
affirmative vote of a majority of votes cast by the holders of outstanding
shares of Parent Common Stock at the Parent Stockholders' Meeting). This
Agreement has been duly executed and delivered by Parent and Merger Sub and,
assuming the due authorization, execution and delivery by the Company, this
Agreement constitutes a legal, valid and binding obligation of each of Parent
and Merger Sub, enforceable against Parent and Merger Sub, as the case may be,
in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by Parent and Merger Sub, do not, and the
performance by Parent and Merger Sub of their respective obligations hereunder
and the consummation of the Merger will not, (i) conflict with or violate any
provision of the Restated Certificate of Incorporation or Bylaws of Parent or
any equivalent organizational documents of any Parent Subsidiary (assuming that
the Certificate Amendment is approved as contemplated by this Agreement), (ii)
assuming that all consents, approvals, authorizations and permits described in
Section 4.05(b) have been obtained and all filings and notifications described
in Section 4.05(b) have been made, conflict with or violate any Law applicable
to Parent or any Parent Subsidiary or by which any property or asset of Parent
or any Parent Subsidiary is bound or affected or (iii) except as set forth in
Section 4.05(a) of the Parent Disclosure Schedule, result in any breach of or
constitute a default (or an event which with the giving of notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent or
any Parent Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, Parent Permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
would neither, individually or in the aggregate, (A) have a Parent Material
Adverse Effect nor (B) prevent or materially delay the performance by Parent or
Merger Sub of their respective obligations pursuant to this Agreement or the
consummation of the Merger.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub does not, and the performance by Parent and Merger Sub of their
respective obligations hereunder or the consummation of the Merger will not,
require any consent, approval, authorization or permit of, or filing by Parent
or Merger Sub with or notification by Parent or Merger Sub to, any Governmental
Entity, except (i) applicable requirements of the Exchange Act, the Securities
Act, Blue Sky Laws, the rules and regulations of the NYSE, state takeover laws,
the premerger notification requirements of the HSR Act, the filing and
recordation of the Certificate of Merger as required by the DGCL, and as set
forth in Section 4.05(b) of the Parent Disclosure Schedule, and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not (A) prevent or materially delay
the performance by Parent or Merger Sub of their respective obligations pursuant
to this Agreement and the consummation of the Merger or (B) individually or in
the aggregate have a Parent Material Adverse Effect.
SECTION 4.06. PERMITS; COMPLIANCE WITH LAWS. Each of Parent and the Parent
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Parent or any
Parent Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "PARENT PERMITS"), and all such
Parent Permits are valid and in full force and effect, except where the failure
to have, or the suspension or cancellation of, any of Parent Permits, or the
failure of any such Parent Permits to be valid and in full force and effect,
would not, individually or in the aggregate, (i) have a Parent Material Adverse
Effect, or (ii) prevent or materially delay the performance by Parent or Merger
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Sub of their respective obligations pursuant to this Agreement and the
consummation of the Merger, and, as of the date of this Agreement, no suspension
or cancellation of any of Parent Permits is pending or, to the knowledge of
Parent, threatened, except where the failure to have, or the suspension or
cancellation of, any of Parent Permits would not, individually or in the
aggregate, (i) have a Parent Material Adverse Effect or (ii) prevent or
materially delay the performance by Parent or Merger Sub of their respective
obligations pursuant to this Agreement and the consummation of the Merger.
Except as disclosed in Section 4.06 of the Parent Disclosure Schedule, neither
Parent nor any Parent Subsidiary is in conflict with, or in default or violation
of, (i) any Law applicable to Parent or any Parent Subsidiary or by which any
property or asset of Parent or any Parent Subsidiary is bound or affected or
(ii) any Parent Permits, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations that would neither individually or in the
aggregate, (A) have a Parent Material Adverse Effect nor (B) prevent or
materially delay the performance by Parent or Merger Sub of their respective
obligations pursuant to this Agreement and the consummation of the Merger.
SECTION 4.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Other than those listed
on Section 4.07(a)(i) of the Parent Disclosure Schedule (the "REPORTING PARENT
SUBSIDIARIES"), no Parent Subsidiary is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the SEC, NYSE, any other stock exchange or any other comparable
Governmental Entity. Except as disclosed in Section 4.07(a)(ii) of the Parent
Disclosure Schedule, Parent and each Reporting Parent Subsidiary has timely
filed all forms, reports and documents required to be filed by it with the SEC,
the NYSE, any other stock exchange or comparable Governmental Entity since
January 1, 1995 through the date of this Agreement (collectively and as amended,
the "PARENT REPORTS"). Except as would not have a Parent Material Adverse
Effect, each Parent Report (i) was prepared in accordance with the requirements
of the Securities Act, the Exchange Act, the NYSE, other stock exchange or
comparable Governmental Entity, as the case may be, and (ii) except as set forth
in Section 4.07(a)(iii) of the Parent Disclosure Schedule, did not at the time
it was filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Parent Reports was prepared in accordance
with U.S. GAAP applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each presented fairly, in
all material respects, the consolidated financial position of Parent and the
consolidated Parent Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to have a Parent Material Adverse Effect). The books and records of
Parent and the Parent Subsidiaries have been, and are being, maintained in
accordance with U.S. GAAP and any other applicable legal and accounting
requirements.
(c) Except as and to the extent set forth on the consolidated balance sheet
of Parent and the Parent Subsidiaries as reported in the Parent Reports,
including the notes thereto, none of Parent or any Parent Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with U.S. GAAP, except for liabilities or
obligations incurred in the ordinary course of business since January 1, 1997
that would not, individually or in the aggregate, have a Parent Material Adverse
Effect.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1997,
except as contemplated by or as disclosed in this Agreement, as set forth in
Section 4.08 of the Parent Disclosure Schedule or as disclosed in any Parent
Report filed since January 1, 1997, Parent and the Parent Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i) any
Parent Material Adverse Effect or any event or development
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that would have a Parent Material Adverse Effect, excluding any changes and
effects resulting from changes in economic, regulatory or political conditions
or changes in conditions generally applicable to the industries in which Parent
and the Parent Subsidiaries are involved, (ii) any event that could reasonably
be expected to prevent or materially delay the performance of Parent's and
Merger Sub's obligations pursuant to this Agreement and the consummation of the
Merger by Parent and Merger Sub, (iii) any material change by Parent in its
accounting methods, principles or practices, (iv) any declaration, setting aside
or payment of any dividend or distribution in respect of the shares of Parent
Common Stock or any redemption, purchase or other acquisition of any of Parent's
securities or (v) any increase in the compensation or benefits or establishment
of any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of
Parent or any Parent Subsidiary except in the ordinary course of business
consistent with past practice.
SECTION 4.09. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) With respect to
each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
ERISA maintained or contributed to by Parent or any Parent Subsidiary, or with
respect to which Parent or any Parent Subsidiary could incur liability under
Section 4069, 4212(c) or 4204 of ERISA (the "PARENT BENEFIT PLANS"), Parent has
delivered (or will, within 15 days of the date hereof, deliver) to the Company a
true and correct copy of (i) such Parent Benefit Plan and the most recent
summary plan description related to each Company Benefit Plan for which a
summary plan description is required, (ii) each trust agreement or other funding
arrangement relating to such Parent Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS, (iv) the most recent actuarial report or
financial statement relating to a Parent Benefit Plan and (v) the most recent
determination letter issued by the IRS with respect to any Parent Benefit Plan
qualified under Section 401(a) of the Code.
(b) Each Parent Benefit Plan has been administered in all material respects
in accordance with its terms and all contributions required to be made under the
terms of any of the Parent Benefit Plans as of the date of this Agreement have
been timely made or have been reflected on the most recent consolidated balance
sheet filed or incorporated by reference in the Parent Reports prior to the date
of this Agreement. Except as set forth in Section 4.09(b) of the Parent
Disclosure Schedule, with respect to the Parent Benefit Plans, no event has
occurred and, to the knowledge of Parent, there exists no condition or set of
circumstances in connection with which Parent or any Parent Subsidiary could be
subject to any liability under the terms of such Parent Benefit Plans, ERISA,
the Code or any other applicable Law which, in any case, would individually or
in the aggregate have a Parent Material Adverse Effect.
(c) Except as set forth in Section 4.09(c) of the Parent Disclosure Schedule
or except as would not have a Parent Material Adverse Effect, with respect to
each Parent Benefit Plan that is not subject to United States Law (a "PARENT
FOREIGN BENEFIT PLAN"):
(i) all employer and employee contributions to each Parent Foreign
Benefit Plan required by Law or by the terms of such Parent Foreign Benefit
Plan have been made or, if applicable, accrued in accordance with normal
accounting practices and a PRO RATA contribution for the period from the
date hereof to and including the Effective Time has been made or accrued in
accordance with normal accounting principles;
(ii) the fair market value of the assets of each funded Parent Foreign
Benefit Plan, the liability of each insurer for any Parent Foreign Benefit
Plan funded through insurance or the book reserve established for any Parent
Foreign Benefit Plan, together with any accrued contributions, is sufficient
to procure or provide for the accrued benefit obligations, as of the
Effective Time, with respect to all current and former participants in such
plan according to the actuarial assumptions and valuations most recently
used to determine employer contributions to such Parent Foreign Benefit Plan
and no transaction contemplated by this Agreement shall cause such assets or
insurance obligations to be less than such benefit obligations; and
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(iii) each Parent Foreign Benefit Plan required to be registered has been
registered and has been maintained in good standing with the appropriate
regulatory authorities.
(d) As of the date of this Agreement, there is no labor dispute, strike or
work stoppage against Parent or any Parent Subsidiary pending or, to the
knowledge of Parent, threatened which may interfere with the respective business
activities of Parent or any Parent Subsidiary, except where such dispute, strike
or work stoppage would not have a Parent Material Adverse Effect. As of the date
of this Agreement, to the knowledge of the Parent, none of Parent, any Parent
Subsidiary, or any of their respective representatives or employees has
committed any unfair labor practice in connection with the operation of the
respective businesses of Parent or any Parent Subsidiary, and there is no charge
or complaint against Parent or any Parent Subsidiary by the National Labor
Relations Board or any comparable governmental agency pending or threatened in
writing, except where such unfair labor practice, charge or complaint would not
have a Parent Material Adverse Effect.
(e) Parent has made available to the Company true and complete copies of (i)
all employment agreements with executive officers of Parent and with each other
officer of Parent and of each Parent Subsidiary providing for annual
compensation in excess of $250,000, (ii) all severance plans, agreements,
programs and policies of Parent and each Parent Subsidiary with or relating to
their respective employees, and (iii) all plans, programs, agreements and other
arrangements of Parent and each Parent Subsidiary with or relating to their
respective employees which contain "change of control" provisions.
(f) No amount paid or payable by Parent or any Parent Subsidiary in
connection with the transactions contemplated hereby either solely as a result
thereof or as a result of such transactions in conjunction with any other events
will be an "excess parachute payment" within the meaning of Section 280G of the
Code.
(g) Except as provided in Section 4.09(g) of the Parent Disclosure Schedule
or as otherwise required by Law, no Parent Benefit Plan provides retiree medical
or retiree life insurance benefits to any person.
SECTION 4.10. ACCOUNTING AND TAX MATTERS. (a) Except as disclosed in the
Parent Reports, neither Parent nor, to the knowledge of Parent, any of its
affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Merger from qualifying
for "pooling of interests" accounting treatment under applicable United States
accounting rules, including, without limitation, applicable SEC accounting
standards, or would prevent the Merger from constituting a transaction
qualifying under Section 368(a) of the Code. Parent is not aware of any
agreement, plan or other circumstance that would prevent the Merger from so
qualifying under Section 368(a) of the Code.
(b) The representations and warranties made in Parent's letter of compliance
with pooling of interest criteria addressed to Coopers & Lybrand ("COOPERS &
LYBRAND") are true as of the date hereof.
SECTION 4.11. CONTRACTS; PARENT DEBT INSTRUMENTS. Except as disclosed in the
Parent Reports or in Section 4.11(a) of the Parent Disclosure Schedule, there is
no contract or agreement that is material to the business, financial condition
or results of operations of Parent and the Parent Subsidiaries taken as a whole
(each, a "PARENT MATERIAL CONTRACT"). Except as disclosed in the Parent Reports
or in Section 4.11(b) of the Parent Disclosure Schedule, neither the Parent nor
any Parent Subsidiary is in violation of or in default under (nor does there
exist any condition which with the passage of time or the giving of notice would
cause such a violation of or default under) any loan or credit agreement, note,
bond, mortgage, indenture or lease, or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that would not,
individually or in the aggregate, result in a Parent Material Adverse Effect.
Set forth in Section 4.11(c) of the Parent Disclosure Schedule is a description
of any material changes to the amount and terms of the indebtedness of Parent
and the Parent Subsidiaries as described in the notes to the financial
statements incorporated in the Parent 1996 10-K.
SECTION 4.12. LITIGATION. Except as disclosed in the Parent Reports or in
Section 4.12 of the Parent Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the
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knowledge of Parent, threatened against Parent or any Parent Subsidiary before
any Governmental Entity that, individually or in the aggregate, is reasonably
likely to have a Parent Material Adverse Effect, and, except as disclosed to the
Company, to the knowledge of Parent, there are no existing facts or
circumstances that would be reasonably likely to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to the Company, Parent
is not aware of any facts or circumstances which would result in the denial of
insurance coverage under policies issued to Parent and the Parent Subsidiaries
in respect of such suits, claims, actions, proceedings and investigations,
except in any case as would not, individually or in the aggregate, have a Parent
Material Adverse Effect. Except as disclosed in the Parent Reports or in Section
4.12 of the Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary
is subject to any outstanding order, writ, injunction or decree which, insofar
as can be reasonably foreseen, individually or in the aggregate, would have a
Parent Material Adverse Effect.
SECTION 4.13. ENVIRONMENTAL MATTERS. Except as disclosed in the Parent
Reports or in Section 4.13 of the Parent Disclosure Schedule or as would not,
individually or in the aggregate, have a Parent Material Adverse Effect:
(a) Parent and the Parent Subsidiaries (i) are in compliance with all,
and are not subject to any asserted liability or, to Parent's knowledge, any
liability, in each case with respect to any, applicable Environmental Laws,
(ii) hold or have applied for all Environmental Permits and (iii) are in
compliance with their respective Environmental Permits;
(b) neither Parent nor any Parent Subsidiary has received any written
notice, demand, letter, claim or request for information alleging that
Parent or any of its Subsidiaries may be in violation of, or liable under,
any Environmental Law;
(c) neither Parent nor any Parent Subsidiary (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree
or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials and, to the knowledge
of Parent, no investigation, litigation or other proceeding is pending or
threatened in writing with respect thereto, or (ii) is an indemnitor in
connection with any threatened or asserted claim by any third-party
indemnitee for any liability under any Environmental Law or relating to any
Hazardous Materials; and
(d) none of the real property owned or leased by Parent or any Parent
Subsidiary is listed or, to the knowledge of the Company, proposed for
listing on the "National Priorities List" under CERCLA, as updated through
the date hereof, or any similar state or foreign list of sites requiring
investigation or cleanup.
SECTION 4.14. TAXES. (a) Except as set forth in Section 4.14 of the Parent
Disclosure Schedule and except for such matters that, individually or in the
aggregate, would not have a Parent Material Adverse Effect, (i) Parent and each
of the Parent Subsidiaries have timely filed or shall timely file all returns
and reports required to be filed by them with any taxing authority with respect
to Taxes for any period ending on or before the Effective Time, taking into
account any extension of time to file granted to or obtained on behalf of Parent
and the Parent Subsidiaries, (ii) all Taxes that are due prior to the Effective
Time have been paid or shall be paid on or before the applicable due date, (iii)
as of the date hereof, no deficiency for any amount of Tax has been asserted or
assessed by a taxing authority against Parent or any of the Parent Subsidiaries
and (iv) Parent and each of the Parent Subsidiaries have provided adequate
reserves in their financial statements for any Taxes that have not been paid,
whether or not shown as being due on any returns.
(b) To the best of Parent's knowledge, no Tax disputes or audits are pending
against, and no claims for Taxes have been received in writing by or any of
Parent Subsidiaries, other than disputes, audits and claims that are not
reasonably likely to have a Parent Material Adverse Effect.
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(c) There are no Tax liens upon any property or assets of Parent or any of
the Parent Subsidiaries except liens for current Taxes not yet due and liens
which have not had and are not reasonably likely to have a Parent Material
Adverse Effect.
SECTION 4.15. POOLING AFFILIATES. Section 4.15 of the Parent Disclosure
Schedule sets forth the names and addresses of those persons who are, in
Parent's reasonable judgment, a Pooling Affiliate of Parent.
SECTION 4.16. NON-COMPETITION AGREEMENTS. Except as set forth on Section
4.16 of the Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary
is a party to any agreement which purports to restrict or prohibit in any
material respect Parent and the Parent Subsidiaries collectively 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 any other wastes services businesses currently engaged in by Parent or any
corporations affiliated with Parent. None of Parent's officers, directors or key
employees is a party to any agreement which, by virtue of such person's
relationship with Parent, restricts in any material respect Parent or any Parent
Subsidiary or affiliate from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 4.17. OPINION OF FINANCIAL ADVISOR. Donaldson, Lufkin & Jenrette
("DLJ") has delivered to the board of directors of Parent its written opinion to
the effect that, as of the date of the opinion, the Exchange Ratio was fair to
Parent from a financial point of view. DLJ has authorized the inclusion of its
opinion in the Joint Proxy Statement and Parent shall promptly, after the date
of this Agreement, deliver a signed copy of such opinion to the Company.
SECTION 4.18. BROKERS. No broker, finder or investment banker (other than
DLJ, Relational Investors, LLC ("RELATIONAL") and Lehman Brothers Inc.
("LEHMAN")) is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of
Parent. Parent has heretofore made available to the Company complete and correct
copies of all agreements between Parent, on the one hand, and each of DLJ,
Relational and Lehman, on the other hand, pursuant to which such firm would be
entitled to any payment relating to the Merger.
SECTION 4.19. INSURANCE. Parent maintains insurance coverage with reputable
insurers in such amounts and covering such risks as are in accordance with
normal industry practice for companies engaged in businesses similar to that of
Parent (taking into account the cost and availability of such insurance).
SECTION 4.20. OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. (a) Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement.
(b) As of the Effective Time, all of the outstanding capital stock of Merger
Sub will be owned directly by Parent. As of the Effective Time, there will be no
options, warrants or other rights, agreements, arrangements or commitments to
which Merger Sub is a party of any character relating to the issued or unissued
capital stock of, or other equity interests in, Merger Sub or obligating Merger
Sub to grant, issue or sell any shares of the capital stock of, or other equity
interests in, Merger Sub, by sale, lease, license or otherwise. There are no
obligations, contingent or otherwise, of Merger Sub to repurchase, redeem or
otherwise acquire any shares of the capital stock of Merger Sub.
(c) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Merger Sub has not and will not
have incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
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ARTICLE V
COVENANTS
SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.01 of the Company Disclosure Schedule or as
expressly contemplated by any other provision of this Agreement (including,
without limitation, Section 5.12(b)), unless Parent shall otherwise agree in
writing, which agreement shall not be unreasonably withheld or delayed, (x) the
respective businesses of the Company and the Company Subsidiaries (other than
WME) shall be conducted only in, and the Company and the Company Subsidiaries
(other than WME) shall not take any action except in, the ordinary course of
business consistent with past practice, (y) the Company shall use all reasonable
efforts to keep available the services of such of the current officers,
significant employees and consultants of the Company and the Company
Subsidiaries (other than WME) and to preserve the current relationships of the
Company and the Company Subsidiaries (other than WME) with such of the
customers, suppliers and other persons with which the Company or any Company
Subsidiary (other than WME) has significant business relations in order to
preserve substantially intact its business organization and (z) with respect to
WME, the Company will use all reasonable efforts to cause WME to comply with the
covenants contained in this Section 5.01, including clauses (a) through (i)
below including, without limitation, by voting on any matter presented for a
vote of stockholders of WME all shares of WME capital stock owned by the Company
or any Company Subsidiary in a manner consistent with this clause (z), and by
directing those of its employees who are on the Board of Directors of WME to
vote on all matters presented for action by such Board in a manner consistent
with this clause (z). By way of amplification and not limitation, except as set
forth in Section 5.01 of the Company Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, neither the Company nor
any Company Subsidiary (other than WME) shall, between the date of this
Agreement and the Effective Time, directly or indirectly, do, or agree to do,
any of the following without the prior written consent of Parent, which consent
shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its certificate of incorporation or bylaws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license or encumbrance of, (i) any shares of capital
stock of the Company or any Company Subsidiary of any class, or securities
convertible into or exchangeable or exercisable for any shares of such
capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company or any
Company Subsidiary (except for the issuance of (A) shares of Company Common
Stock issuable pursuant to the Company Stock Options outstanding on the date
of this Agreement and (B) a maximum of 14,650,015 shares of Company Common
Stock issuable pursuant to the Company Subordinated Notes), or (ii) any
property or assets of the Company or any Company Subsidiary, except in the
ordinary course of business and in a manner consistent with past practice or
in an aggregate amount not in excess of $15,000,000;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any
division thereof or any assets, other than acquisitions of assets (excluding
the acquisition of a business or substantially all of the stock or assets
thereof) in the ordinary course of business consistent with past practice,
and any acquisitions for consideration, calculated as of the date of
execution of the definitive agreement for any such acquisition, that is not,
in the aggregate for all such acquisitions, in excess of $500 million; (ii)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, except
for (A) indebtedness for borrowed money
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incurred in the ordinary course of business and consistent with past
practice and incurred to refinance outstanding indebtedness for borrowed
money existing on the date of this Agreement, or (B) indebtedness for
borrowed money incurred to finance acquisitions permitted by clause (i) of
this paragraph (c); (iii) terminate, cancel or request any material change
in, or agree to any material change in, any Company Material Contract or
enter into any contract or agreement material to the business, results of
operations or financial condition of the Company and the Company
Subsidiaries taken as a whole, in either case other than in the ordinary
course of business, consistent with past practice; (iv) make or authorize
any capital expenditure, other than capital expenditures in the ordinary
course of business consistent with past practice that are not, in the
aggregate, in excess of (A) $1.2 billion plus (B) 15% of the aggregate
consideration, calculated as of the date of execution of each definitive
acquisition agreement, paid for in acquisitions permitted by clause (i) of
this paragraph (c); or (v) enter into or amend any contract, agreement,
commitment or arrangement that, if fully performed, would not be permitted
under this Section 5.01(c);
(d) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except (i) for regular quarterly dividends not in excess of
$0.17 per share of Company Common Stock and (ii) that any Company Subsidiary
may pay dividends or make other distributions to the Company or any other
Company Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees or officers of the Company or
any Company Subsidiary who are not executive officers of the Company, or
grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of the Company or any Company Subsidiary, or establish, adopt,
enter into or amend any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee
of the Company or any Company Subsidiary, except to the extent required by
applicable Law or the terms of a collective bargaining agreement;
(g) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with
past practice, as required by U.S. GAAP or as may be required by the SEC;
(h) make any tax election or settle or compromise any material federal,
state or local United States income tax liability, or any income tax
liability of any other jurisdiction, other than those made in the ordinary
course of business consistent with past practice and those for which
specific reserves have been recorded on the consolidated balance sheet of
the Company and the consolidated Company Subsidiaries dated as of December
31, 1996 included in the Company's Form 10-K for the period ended December
31, 1996 (the "1996 COMPANY 10-K") and only to the extent of such reserves;
or
(i) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.02. CONDUCT OF BUSINESS BY PARENT PENDING THE CLOSING. Parent
agrees that, between the date of this Agreement and the Effective Time, except
as set forth in Section 5.02 of the Parent Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement (including, without
limitation, Section 5.12(b)), unless the Company shall otherwise agree in
writing, which agreement shall not be unreasonably withheld or delayed, (x) the
respective businesses of Parent and the Parent Subsidiaries shall be conducted
only in, and Parent and the Parent Subsidiaries shall not take any action except
in, the ordinary course of business consistent with past practice and (y) Parent
shall use its reasonable efforts
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to keep available the services of such of the current officers, significant
employees and consultants of Parent and the Parent Subsidiaries and to preserve
the current relationships of Parent and the Parent Subsidiaries with such of the
customers, suppliers and other persons with which Parent or any Parent
Subsidiary has significant business relations in order to preserve substantially
intact its business organization. By way of amplification and not limitation,
except as set forth in Section 5.02 of the Parent Disclosure Schedule or as
expressly contemplated by any other provision of this Agreement, neither Parent
nor any Parent Subsidiary shall, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed:
(a) amend or otherwise change its certificate of incorporation or bylaws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license or encumbrance of, any shares of capital
stock of Parent or any Parent Subsidiary of any class, or securities
convertible into or exchangeable or exercisable for any shares of such
capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of Parent or any
Parent Subsidiary (except for the issuance of (A) a maximum of 19,176,005
shares of Parent Common Stock issuable pursuant to Parent Stock Options
outstanding on the date of this Agreement and the issuance, in the ordinary
course of business, consistent with past practices and on terms no more
favorable than customary prior grants, of Parent Stock Options to acquire
shares of Parent Common Stock and the shares of Parent Common Stock issuable
pursuant to such Parent Stock Options, in accordance with the terms of the
Parent Stock Plans, (B) a maximum of 15,542,075 shares of Parent Common
Stock issuable pursuant to the Parent Subordinated Notes, (C) 4,035,572
shares of Parent Company Stock issuable upon Acquired Company Conversions
and (D) shares of Parent Common Stock issuable as consideration for
acquisitions as contemplated by Section 5.02(c));
(c) (i) acquire (including, without limitation, by merger, consolidation
or acquisition of stock or assets) any interest in any corporation,
partnership, other business organization or person or any division thereof
or any assets, other than acquisition of assets (excluding the acquisition
of a business or substantially all of the stock or assets thereof) in the
ordinary course of business consistent with past practice, and any
acquisitions for consideration, calculated as of the date of execution of
the definitive agreement for any such acquisition that is not, in the
aggregate for all such acquisitions, in excess of $1.2 billion (which
acquisitions may include, but need not be limited to, those set forth on
Section 5.02(c) of the Parent Disclosure Schedule); (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person for borrowed money, except for (A)
indebtedness for borrowed money incurred in the ordinary course of business
and consistent with past practice and incurred to refinance outstanding
indebtedness for borrowed money existing on the date of this Agreement, or
(B) indebtedness for borrowed money incurred to finance acquisitions
permitted by clause (i) of this paragraph (c); (iii) make or authorize any
capital expenditure, other than capital expenditures in the ordinary course
of business consistent with past practice that are not, in the aggregate, in
excess of (A) $500 million plus (B) 15% of the aggregate consideration,
calculated as of the date of execution of each definitive acquisition
agreement, paid for in acquisitions permitted by clause (i) of this
paragraph (c); or (iv) enter into or amend any contract, agreement,
commitment or arrangement that, if fully performed, would not be permitted
under this Section 5.02(c);
(d) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except that any Parent Subsidiary may pay dividends or make
other distributions to Parent or any other Parent Subsidiary;
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(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with
past practice, as required by U.S. GAAP or as may be required by the SEC; or
(g) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.03. COOPERATION. The Company and Parent shall coordinate and
cooperate in connection with (i) the preparation of the Registration Statement
and the Joint Proxy Statement, (ii) determining whether any action by or in
respect of, or filing with, any Governmental Entity is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
Parent Material Contracts or any Company Material Contracts, in connection with
the consummation of the Merger and (iii) seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Registration Statement and the Joint Proxy
Statement and timely seeking to obtain any such actions, consents, approvals or
waivers.
SECTION 5.04. NOTICES OF CERTAIN EVENTS. Each of Parent and the Company
shall give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be required
in connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting Parent, the Company,
the Parent Subsidiaries or the Company Subsidiaries that relate to the
consummation of the Merger; (iv) the occurrence of a default or event that, with
the giving of notice or lapse of time or both, will become a default under any
Company Material Contract or Parent Material Contract; and (v) any change that
is reasonably likely to result in a Company Material Adverse Effect or a Parent
Material Adverse Effect or is reasonably likely to delay or impede the ability
of either the Company or Parent to perform its respective obligations pursuant
to this Agreement and to effect the consummation of the Merger.
SECTION 5.05. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Except as
prohibited by any confidentiality agreement or similar agreement or arrangement
to which Parent or the Company or any of the Parent Subsidiaries or the Company
Subsidiaries is a party or by applicable Law or the regulations or requirements
of any stock exchange or other regulatory organization with whose rules a party
hereto is required to comply, from the date of this Agreement to the Effective
Time, Parent and the Company shall (and shall cause the Parent Subsidiaries and
the Company Subsidiaries, respectively, to): (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, "REPRESENTATIVES")) access at
reasonable times upon prior notice to its and its subsidiaries' officers,
employees, agents, properties, offices and other facilities and to the books and
records thereof, and (ii) furnish promptly such information concerning its and
its subsidiaries' business, properties, contracts, assets, liabilities and
personnel as the other party or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 5.05 shall affect or be deemed
to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with their respective obligations under
the Confidentiality Agreement dated January 26, 1998 (the "CONFIDENTIALITY
AGREEMENT") between Parent and the Company with respect to the information
disclosed pursuant to this Agreement.
SECTION 5.06. NO SOLICITATION OF TRANSACTIONS. (a) Each party to this
Agreement shall not, directly or indirectly, and shall instruct its officers,
directors, employees, subsidiaries, agents or advisors or other representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it), not to, directly or indirectly, solicit, initiate or knowingly
encourage (including by way of furnishing
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nonpublic information), or take any other action knowingly to facilitate, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to its stockholders) that constitutes, or may reasonably
be expected to lead to, any Competing Transaction, or enter into or maintain or
continue discussions or negotiate with any person in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors or
employees of such party or any of its subsidiaries, or any investment banker,
financial advisor, attorney, accountant or other representative retained by such
party or any of such party's subsidiaries, to take any such action; PROVIDED,
HOWEVER, that nothing contained in this Section 5.06 shall prohibit the Board of
Directors of Parent or the Company from furnishing information to, or entering
into discussions or negotiations with, any person in connection with an
unsolicited (from the date of this Agreement) proposal by such person to acquire
such party pursuant to a merger, consolidation, share exchange, tender offer,
exchange offer, business combination or other similar transaction or to acquire
all or substantially all of the assets of such party or any of its subsidiaries,
if, and only to the extent that, (i) such Board of Directors, after consultation
with outside legal counsel (which may include its regularly engaged outside
legal counsel), determines in good faith that such action is required for such
Board of Directors to comply with its duties to its stockholders imposed by
applicable Law and (ii) prior to furnishing such information to, or entering
into discussions or negotiations with, such person, such party obtains from such
person an executed confidentiality agreement on terms no less favorable to the
Company or Parent, as the case may be, than those contained in the
Confidentiality Agreement. Each party hereto shall notify the other parties
hereto promptly if any proposal or offer, or any inquiry or contact with any
person with respect thereto, regarding a Competing Transaction is made. Each
party hereto immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Transaction. Each party hereto agrees not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party. Notwithstanding the foregoing, either party
may enter into a confidentiality agreement containing a standstill provision
which permits, or waive compliance with any existing standstill agreement in
order to permit, a third party to make a confidential takeover proposal to the
Board of Directors which could reasonably be expected to result in a Competing
Transaction; PROVIDED, HOWEVER, that either party may then further waive
compliance with a standstill agreement in order to permit a third party to make
such takeover proposal to such party's stockholders so as to enable the Company
or Parent to terminate this Agreement pursuant to the provisions of Section
8.01(i) or (j), as the case may be; PROVIDED FURTHER that nothing in this
Section 5.06(a) shall affect the obligation of the Company or Parent to pay the
Company Termination Fee or the Parent Termination Fee (each as hereinafter
defined) pursuant to the terms of Section 8.05.
(b) A "COMPETING TRANSACTION" means any of the following involving the
Company or Parent, as the case may be (other than the Merger contemplated by
this Agreement): (i) a merger, consolidation, share exchange, business
combination or other similar transaction, (ii) any sale, lease, exchange,
transfer or other disposition of 25 percent or more of the assets of such party
and its subsidiaries, taken as a whole, or of assets of such party and its
subsidiaries generating 25 percent or more of such party's revenues or operating
income, or (iii) a tender offer or exchange offer for 25 percent or more of the
outstanding voting securities of such party.
SECTION 5.07. POOLING MATTERS. (a) From and after the date of this
Agreement, each of the parties hereto, and each of their respective subsidiaries
or other affiliates, shall take all reasonable actions necessary to cause the
Merger to be characterized as a pooling of interests for accounting purposes.
(b) As soon as practicable following the effective time of the merger of WMI
Merger Sub, Inc. ("WMI MERGER SUB"), a wholly owned subsidiary of the Company,
with and into Wheelabrator Technologies Inc. ("WTI") as contemplated by the
Agreement and Plan of Merger among the Company, WTI and WMI Merger Sub, the
Company shall take all actions necessary to cause the WTI benefits plans set
forth on Section 3.10 of the Company Disclosure Schedule (the "WTI STOCK PLANS")
to be amended so as to provide
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that the Company shall satisfy any obligations it may have to repurchase a
participant's exercisable but unexercised options under such WTI Stock Plans by
issuing to such participant shares of the Company Common Stock, with a fair
market value equal to the cash that would otherwise have been payable
thereunder.
(c) The Company agrees that, at Parent's request, it shall cooperate with
and assist Parent in conducting one or more registered exchange offers to
exchange outstanding Company Stock Options for shares of Parent Common Stock as
of the Effective Time. The Company shall furnish all information concerning the
Company as Parent may reasonably request in connection with such exchange
offer(s), including as may be necessary to comply with the applicable
requirements of the Exchange Act, the Securities Act, the NYSE and the DGCL.
(d) The Company will file with the SEC a registration statement on Form S-3
or other applicable form (the "S-3 REGISTRATION STATEMENT") to dispose of any
"tainted shares" required to be disposed of prior to the Effective Time
(including those described in Section 3.10 of the Company Disclosure Schedule,
as well as any other shares of Company Common Stock required to be disposed of
prior to the Effective Time in furtherance of the provisions of Section
5.07(a)); PROVIDED, HOWEVER, that the terms and conditions of any such
disposition shall be reasonably acceptable to Parent (it being understood and
agreed that any sale of "tainted shares" at a customary discount to the
then-market price, less customary underwriters' discounts and commissions, shall
be reasonably acceptable to Parent). Parent will cooperate with the Company in
fulfilling the requirements of the S-3 Registration Statement.
SECTION 5.08. LETTERS OF ACCOUNTANTS. (a) Parent shall use all reasonable
efforts to cause to be delivered to the Company a "comfort" letter of Coopers &
Lybrand dated and delivered as of the date the Registration Statement shall have
become effective and a "bring-down comfort" letter of Coopers & Lybrand dated
and delivered as of the Effective Time. The Company shall use all reasonable
efforts to cause to be delivered to Parent a "comfort" letter of Arthur Andersen
dated and delivered as of the date the Registration Statement shall have become
effective and a "bring-down comfort" letter of Arthur Andersen dated and
delivered as of the Effective Time. Each such letter shall be addressed to
Parent and the Company, and shall be in form and substance reasonably
satisfactory to the recipient thereof and reasonably customary in scope and
substance for letters delivered by independent public accountants in connection
with mergers such as the one contemplated by this Agreement.
(b) Each of Parent and the Company shall use all reasonable efforts to cause
to be delivered to the other an opinion from Coopers & Lybrand and Arthur
Andersen, respectively, addressed to each of Parent and the Company and dated as
of the Closing Date, that the Merger will qualify for "pooling of interests"
accounting treatment under applicable United States accounting rules, including,
without limitation, applicable SEC accounting standards.
SECTION 5.09. PLAN OF REORGANIZATION. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement, each party hereto shall use all reasonable efforts to
cause the Merger to qualify, and shall not, without the prior written consent of
the other parties hereto, knowingly take any actions or cause any actions to be
taken which could prevent the Merger from qualifying as a reorganization under
the provisions of Section 368(a) of the Code.
SECTION 5.10. SUBSEQUENT FINANCIAL STATEMENTS. Prior to the Effective Time,
each of the Company and Parent (a) shall consult with the other prior to making
publicly available its financial results for any period and (b) shall consult
with the other prior to the filing of, and shall timely file with the SEC, each
Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Current Report on
Form 8-K required to be filed by such party under the Exchange Act and the rules
and regulations promulgated thereunder and shall promptly deliver to the other
copies of each such report filed with the SEC. As of their respective dates,
none of such reports shall contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances
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under which they were made, not misleading. The respective audited financial
statements and unaudited interim financial statements of each of the Company and
Parent, as the case may be, included in such reports shall fairly present the
financial position of such party and its Subsidiaries as at the dates thereof
and the results of their operations and cash flows for the periods then ended in
accordance with U.S. GAAP applied on a consistent basis and subject, in the case
of unaudited interim financial statements, to normal year-end adjustments.
SECTION 5.11. CONTROL OF OPERATIONS. Nothing contained in this Agreement
shall give Parent, directly or indirectly, the right to control or direct the
operations of the Company and the Company Subsidiaries prior to the Effective
Time. Nothing contained in this Agreement shall give the Company, directly or
indirectly, the right to control or direct the operations of Parent and the
Parent Subsidiaries prior to the Effective Time. Prior to the Effective Time,
each of Parent and the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
SECTION 5.12. FURTHER ACTION; CONSENTS; FILINGS. (a) Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the Merger, (ii)
obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent,
the Company or the Surviving Corporation or any of their subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger, including, but not limited to, actions with
respect to Environmental Permits, (iii) make all necessary filings, and
thereafter make any other required or appropriate submissions, with respect to
this Agreement and the Merger required under (A) the rules and regulations of
the NYSE, (B) the Securities Act, the Exchange Act and any other applicable
federal or state securities Laws, (C) the HSR Act and (D) any other applicable
Law and (iv) obtain any consents necessary such that the Merger will not
constitute a change of control, or any similar event, which constitutes a
default (or an event which with notice or lapse of time or both would become a
default) under any material contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company, Parent or any
of their subsidiaries is a party. The parties hereto shall cooperate and consult
with each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling parties and their
advisors prior to filing, and any comments of the nonfiling parties and their
advisors shall be considered prior to the filing of such document. No party
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger at the behest
of any Governmental Entity without the consent and agreement of the other
parties hereto.
(b) Without limiting the generality of the foregoing, and subject to the
following sentence, each of the parties hereto agrees, and shall cause each of
its respective Subsidiaries to cooperate and to use their commercially
reasonable efforts to obtain any government clearances required for completion
of the Merger (including though compliance with the HSR Act), to respond to any
government requests for information, and to contest and resist any action,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any Governmental Order (whether
temporary, preliminary or permanent) that restricts, prevents or prohibits the
consummation of the Merger, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial appeal and all
available legislative action. Each of the parties hereto also agrees to take or
cause to be taken the following actions: (i) provide promptly to Governmental
Entities with regulatory jurisdiction over enforcement of any applicable
antitrust laws ("GOVERNMENT ANTITRUST ENTITY") information and documents
requested by any Government Antitrust Entity or necessary, proper or advisable
to permit consummation of the transactions contemplated by this Agreement; (ii)
file any Notification and Report Form and related material required under the
HSR Act as soon as practicable after the date hereof, and thereafter use its
reasonable efforts to certify as soon as practicable its substantial compliance
with any requests for additional information or documentary material that may be
made under the HSR Act; (iii) deliver the proffer of Parent and the
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Company of their willingness to (A) sell or otherwise dispose of, or hold
separate and agree to sell or otherwise dispose of, such assets, categories of
assets or businesses of Parent or Parent Subsidiaries or Company or Company
Subsidiaries (other than WME), as applicable, and (B) terminate such existing
relationships and contractual rights and obligations (and, in each case, to
enter into agreements with the relevant Government Antitrust Entity giving
effect thereto) in each case with respect to the foregoing clause (A) or (B), if
such action is necessary or reasonably advisable for the purpose of avoiding or
preventing any action by any Government Antitrust Entity which would restrain,
enjoin or otherwise prevent or materially delay consummation of the transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that no party shall be
required to take any actions described in this clause (iii) if such actions
would be reasonably likely, individually or in the aggregate, to have a Parent
Material Adverse Effect after giving effect to the Merger; and (iv) 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 (including the appeal thereof, the
posting of a bond or the taking of the steps contemplated by clause (iii) of
this subsection (b)) necessary to vacate, modify or suspend such injunction or
order so as to permit such consummation prior to the deadline specified in
Section 8.01(b). 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 any
Government Antitrust Entity relating to this Agreement or any of the matters
described in this Section 5.12(b). The parties hereto agree that all material
telephonic calls and meetings with a Government Antitrust Entity regarding the
transactions contemplated hereby or any of the matters described in this Section
5.12(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.
SECTION 5.13. STOCKHOLDER RIGHTS PLAN. Notwithstanding the limitations set
forth in this Agreement with respect to the conduct of the Company's or Parent's
respective businesses prior to the Effective Time, including the limitations set
forth in Sections 5.01 and 5.02, either the Company or Parent may, at any time
prior to the Effective Time, take all actions necessary to adopt and implement a
stockholder rights plan, provided that the terms of such stockholder rights plan
shall specifically exclude the consummation of the Merger as contemplated by
this Agreement.
SECTION 5.14. EMPLOYEE BENEFIT PLANS. (a) Following the Effective Time,
Parent shall arrange for each employee of the Company or any Company Subsidiary
to participate in any counterpart Parent Benefit Plans in accordance with the
eligibility criteria thereof, provided that (i) such participants shall receive
full credit for years of service with the Company or any Company Subsidiary (and
service otherwise credited by the Company or any Company Subsidiary) prior to
the Effective Time for all purposes for which such service was recognized under
the Company Benefit Plans including, but not limited to, eligibility to
participate, vesting, and, to the extent not duplicative of benefits received
under such Company Benefit Plan, the amount of benefits, (ii) such participants
shall participate in the Parent Benefit Plans on terms no less favorable than
those offered by Parent to similarly situated employees of Parent, and (iii)
Parent shall cause any and all pre-existing condition limitations, eligibility
waiting periods and evidence of insurability requirements under any group plans
to be waived with respect to such participants and their eligible dependents and
shall provide each such participant with credit for any co-payments and
deductibles paid prior to the Effective Time for purposes of satisfying any
applicable deductible, out-of-pocket, or similar requirements under any health
plans in which such participants are eligible to participate after the Effective
Time. Notwithstanding any of the foregoing to the contrary, none of the
provisions
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contained herein shall operate to duplicate any benefit provided to any employee
of the Company or the funding of any such benefit.
(b) Following the Effective Time, Parent shall cause the Surviving
Corporation to honor and perform, pursuant to their terms, all employee benefit
obligations to current and former employees and directors of the Company under
any Company Benefit Plans; PROVIDED, HOWEVER, that nothing contained herein
shall limit any reserved right in any Company Benefit Plan to amend, modify,
suspend, revoke or terminate any such plan.
(c) Notwithstanding any of the foregoing to the contrary, prior to the
Effective Time, the Company shall take all necessary action to terminate the
Company Supplemental Executive Retirement Plan, as amended and restated as of
November 11, 1997 (the "SERP"). No further benefits shall accrue under the SERP
after its termination (except that participants shall be credited with the
maximum number of additional years of benefit service to which the participant
would be entitled under his or her employment agreement if his or her employment
terminated upon the termination of the SERP under circumstances which would
entitle him or her to severance or similar benefits under such employment
agreement) and all benefits thereunder shall be fully vested and paid out on a
present value basis, using the actuarial assumptions applicable to lump sum
payments under the Company's qualified defined benefit plan, effective as of the
date of termination of the SERP.
(d) To the extent that Parent elects to terminate after the Effective Time
any employee pension benefit plan maintained by the Company or any Company
Subsidiary which is a defined benefit plan, then all accrued benefits thereunder
shall be fully vested and the accrued benefits shall be paid as promptly as
practicable to participants thereunder who so elect in a lump sum payment.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT; JOINT PROXY STATEMENT. (a) As promptly
as practicable after the execution of this Agreement, (i) Parent and the Company
shall jointly prepare and file with the SEC a joint proxy statement with respect
to the Merger relating to the special meeting of each of the Company's
stockholders (the "COMPANY STOCKHOLDERS' MEETING") and Parent's stockholders
(the "PARENT STOCKHOLDERS' MEETING" and, together with the Company Stockholders'
Meeting, the "STOCKHOLDERS' MEETINGS") to be held in connection with the Merger
(together with any amendments thereto, the "JOINT PROXY STATEMENT") and (ii)
Parent shall prepare and file with the SEC a registration statement on Form S-4
(together with all amendments thereto, the "REGISTRATION STATEMENT"), in
connection with the registration under the Securities Act of the issuance of
Parent Common Stock to the Company's stockholders pursuant to the Merger, in
which the Joint Proxy Statement shall be included as a prospectus. Copies of the
Joint Proxy Statement shall be provided to the NYSE in accordance with the rules
of such exchange. Each of the parties hereto shall use all reasonable efforts to
cause the Registration Statement to become effective as promptly as practicable,
and, prior to the effective date of the Registration Statement, the parties
hereto shall take all action required under any applicable Laws in connection
with the issuance of shares of Parent Common Stock pursuant to the Merger.
Parent or the Company, as the case may be, shall furnish all information
concerning Parent or the Company as the other party may reasonably request in
connection with such actions and the preparation of the Registration Statement
and Joint Proxy Statement. As promptly as practicable after the effective date
of the Registration Statement, the Joint Proxy Statement shall be mailed to the
stockholders of Parent and the Company. Each of the parties hereto shall cause
the Joint Proxy Statement to comply as to form and substance in all material
respects with the applicable requirements of (i) the Exchange Act, (ii) the
NYSE, (iii) the Securities Act and (iv) the DGCL.
(b) (i) The Joint Proxy Statement shall include the approval of this
Agreement and the recommendation of the Board of Directors of the Company to the
Company's stockholders that they vote in favor of adoption of this Agreement;
PROVIDED, HOWEVER, that the Board of Directors of the Company may, at any time
prior to the Effective Time, withdraw, modify or change any such recommendation
to the extent that
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the Board of Directors of the Company determines in good faith, after
consultation with outside legal counsel (who may be the Company's regularly
engaged outside legal counsel), that such withdrawal, modification or change of
its recommendation is required by its fiduciary duties to the Company's
stockholders under applicable Law. In addition, the Joint Proxy Statement shall
include the opinion of Merrill Lynch referred to in Section 3.17.
(ii) The Joint Proxy Statement shall include the approval of this Agreement
and the recommendation of the Board of Directors of Parent to Parent's
stockholders that they vote in favor of the Share Issuance and the Certificate
Amendment contemplated hereby; PROVIDED, HOWEVER, that the Board of Directors of
Parent may, at any time prior to the Effective Time, withdraw, modify or change
any such recommendation to the extent that the Board of Directors of Parent
determines in good faith, after consultation with outside legal counsel (who may
be Parent's regularly engaged outside legal counsel), that such withdrawal,
modification or change of its recommendation is required by its fiduciary duties
to Parent's stockholders under applicable Law. In addition, the Joint Proxy
Statement shall include the opinion of DLJ referred to in Section 4.17.
(c) No amendment or supplement to the Joint Proxy Statement or the
Registration Statement shall be made without the prior review of Parent and the
Company, and any comments of Parent or the Company shall be considered prior to
filing such amendment or supplement, to the extent practicable. Each of the
parties hereto shall advise the other parties hereto, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC or the NYSE for amendment of the Joint Proxy
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
(d) The information supplied by the Company for inclusion in the
Registration Statement and the Joint Proxy Statement shall not, at (i) the time
the Registration Statement is filed with the SEC, (ii) if different, the time
the Registration Statement is declared effective, (iii) the time the Joint Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of the Company and Parent, (iv) the time of the Company
Stockholders' Meeting, (v) the time of the Parent Stockholders' Meeting and (vi)
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Company or any Company Subsidiary, or their
respective officers or directors, should be discovered by the Company that
should be set forth in an amendment or a supplement to the Registration
Statement or Joint Proxy Statement, the Company shall promptly inform Parent.
All documents that the Company is responsible for filing with the SEC in
connection with the Merger will comply as to form in all material respects with
the applicable requirements of the NYSE, the DGCL, the Securities Act and the
Exchange Act.
(e) The information supplied by Parent for inclusion in the Registration
Statement and the Joint Proxy Statement shall not, at (i) the time the
Registration Statement is filed with the SEC, (ii) if different, the time the
Registration Statement is declared effective, (iii) the time the Joint Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of Parent and the Company, (iv) the time of the Company
Stockholders' Meeting, (v) the time of the Parent Stockholders' Meeting and (vi)
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to Parent or any Parent Subsidiary, or their respective
officers or directors, should be discovered by Parent that should be set forth
in an amendment or a supplement to the Registration Statement or Joint Proxy
Statement, Parent shall promptly inform the Company. All documents that Parent
is responsible for filing with the SEC in connection with the Merger will comply
as to form in all material respects with the applicable requirements of the
NYSE, the DGCL, the Securities Act and the Exchange Act.
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SECTION 6.02. STOCKHOLDERS' MEETINGS. The Company shall call and hold the
Company Stockholders' Meeting, and Parent shall call and hold the Parent
Stockholders' Meeting, in each case as promptly as practicable, for the purpose,
in the case of the Company Stockholders' Meeting, of voting upon the adoption of
this Agreement and the Merger contemplated hereby, and, in the case of the
Parent Stockholders' Meeting, of voting upon the adoption of the Certificate
Amendment and the Share Issuance pursuant to the Joint Proxy Statement, and each
of Parent and the Company shall use its reasonable efforts to hold the
Stockholders' Meetings on the same day and as soon as practicable after the date
on which the Registration Statement becomes effective. The Company shall use its
reasonable efforts to solicit from its stockholders proxies in favor of the
adoption of this Agreement pursuant to the Joint Proxy Statement and shall take
all other action necessary or advisable to secure the vote or consent of
stockholders required by the DGCL or applicable stock exchange requirements to
obtain such approval, except to the extent that the Board of Directors of the
Company determines in good faith after consultation with outside legal counsel
(who may be the Company's regularly engaged outside legal counsel) that the
withdrawal, modification or change of its recommendation is required by its
fiduciary duties to the Company stockholders under applicable Law. Parent shall
use its reasonable efforts to solicit from its stockholders proxies in favor of
the Certificate Amendment and the Share Issuance contemplated hereby pursuant to
the Joint Proxy Statement, and shall take all other action necessary or
advisable to secure the vote or consent of stockholders required by the DGCL or
applicable stock exchange requirements to obtain such approval, except to the
extent that the Board of Directors of Parent determines in good faith after
consultation with outside legal counsel (who may be Parent's regularly engaged
outside legal counsel) that the withdrawal, modification or change of its
recommendation is required by its fiduciary duties to Parent's stockholders
under applicable Law. Each of the parties hereto, subject to the exercise of
their fiduciary duties to their respective stockholders, as described in this
Section 6.02, shall take all other action necessary or, in the opinion of the
other parties hereto, advisable to promptly and expeditiously secure any vote or
consent of stockholders required by applicable Law and such party's Restated
Certificate of Incorporation and Bylaws to effect the Merger.
SECTION 6.03. POST-MERGER DIRECTORS AND CHIEF EXECUTIVE OFFICER OF PARENT.
(a) The Board of Directors of Parent shall take such action as may be necessary
to cause Parent's Board of Directors immediately following the Effective Time to
be composed of fourteen members, and to cause seven persons designated by the
Board of Directors of the Company prior to the Closing (the "COMPANY DESIGNEES")
to be elected to Parent's Board of Directors. In furtherance thereof, Parent
shall increase the size of its Board of Directors and secure the resignations of
such number of its incumbent directors as is necessary to effectuate the
foregoing sentence. To the extent practicable, the Company Designees and the
members of the Parent board of Directors designated by Parent shall be equally
distributed among the Parent's three classes of directors at the Effective Time.
All of the Company Designees shall serve in accordance with the Restated
Certificate of Incorporation and Bylaws of Parent until their respective
successors are duly elected or appointed and qualified. The Board of Directors
of Parent shall take such action as may be necessary to cause Mr. Robert S.
Miller to be named as the Non-Executive Chairman of the Board of Parent for a
12-month term to begin immediately following the Effective Time. Following the
expiration of such term, Mr. John E. Drury shall be named as the Chairman of the
Board of Parent.
(b) The current Chief Executive Officer of Parent shall remain as Chief
Executive Officer of Parent following the Effective Time.
SECTION 6.04. POOLING AFFILIATES. (a) Not less than 45 days prior to the
Effective Time, the Company shall deliver to Parent a list of names and
addresses of those persons, in the Company's reasonable judgment, at the record
date for the Company Stockholders' Meeting, who were Pooling Affiliates of the
Company. The Company shall provide Parent such information and documents as
Parent shall reasonably request for purposes of reviewing such list. The Company
shall use its reasonable efforts to deliver or cause to be delivered to Parent,
prior to the Effective Time, an affiliate letter in the form attached hereto as
Exhibit 6.04(a) (the "COMPANY AFFILIATE LETTER"), executed by each of the
Pooling Affiliates of the Company
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identified in the above-referenced list. The foregoing notwithstanding, Parent
shall be entitled to place legends as specified in the Company Affiliate Letter
on the certificates evidencing any of the Parent Common Stock to be received by
(i) any Pooling Affiliate of the Company or (ii) any person Parent reasonably
identifies (by written notice to the Company) as being a person who may be
deemed an "affiliate" within the meaning of Rule 145 of the rules and
regulations of the Securities Act or applicable SEC accounting releases with
respect to pooling-of-interests accounting treatment, pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the terms of the
Company Affiliate Letter, regardless of whether such person has executed the
Company Affiliate Letter and regardless of whether such person's name and
address appear on Section 3.15 of the Company Disclosure Schedule.
(b) Not less than 45 days prior to the Effective Time, Parent shall deliver
to the Company a list of names and addresses of those persons who were, in
Parent's reasonable judgment, at the record date for the Parent Stockholders'
Meeting, Pooling Affiliates of Parent. Parent shall provide the Company such
information and documents as the Company shall reasonably request for purposes
of reviewing such list. Parent shall use its reasonable efforts to deliver or
cause to be delivered to the Company, prior to the Effective Time, an affiliate
letter in the form attached hereto as Exhibit 6.04(b) (the "PARENT AFFILIATE
LETTER"), executed by each of the Pooling Affiliates of Parent identified in the
above-referenced list.
SECTION 6.05. ASSUMPTION OF DEBT. With respect to the Company's indebtedness
identified on Section 6.05 of the Company Disclosure Schedule issued by the
Company under an indenture qualified under the Trust Indenture Act of 1939 (the
"COMPANY INDENTURES"), if required by the Company Indentures, the Surviving
Corporation shall execute and deliver to the trustee under each Company
Indenture a supplemental indenture, in form satisfactory to the trustee,
expressly assuming the obligations of the Company with respect to the due and
punctual payment of the principal of (and premium, if any) and interest on such
indebtedness and the due and punctual performance of all the terms, covenants
and conditions of the Company Indentures to be kept or performed by the Company,
and shall deliver such supplemental indenture to the trustee under each Company
Indenture. Holders of the Company Subordinated Notes who convert after the
Effective Time shall be entitled to receive Parent Common Stock based on a ratio
determined in accordance with Section 2.01(a).
SECTION 6.06. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) Parent and
Merger Sub agree that the indemnification obligations set forth in the Company's
Restated Certificate of Incorporation and Bylaws, in each case as of the date of
this Agreement, shall survive the Merger (and, prior to the Effective Time,
Parent shall cause the Certificate of Incorporation and Bylaws of Merger Sub to
reflect such provisions) and shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of the individuals who on or prior
to the Effective Time were directors, officers, employees or agents of the
Company or the Company Subsidiaries.
(b) The Company shall, to the fullest extent permitted under applicable Law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation shall, to the
fullest extent permitted under applicable Law, indemnify and hold harmless, each
present and former director, officer, trustee, fiduciary, employee or agent of
the Company and each Company Subsidiary and each such person who served at the
request of the Company or any Company Subsidiary as a director, officer,
trustee, partner, fiduciary, employee or agent of another corporation,
partnership, joint venture, trust, pension or other employee benefit plan or
enterprise (collectively, the "INDEMNIFIED PARTIES") against all costs and
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as an
officer or director, in each case occurring before the Effective Time (including
the transactions contemplated by this Agreement). Without limiting the
foregoing, in the event of any such claim, action, suit, proceeding or
investigation, the Company or the Surviving Corporation, as the case may
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be, shall pay the fees and expenses of counsel selected by any Indemnified
Party, which counsel shall be reasonably satisfactory to the Company or the
Surviving Corporation, as the case may be, promptly after statements therefor
are received (unless the Surviving Corporation shall elect to defend such
action).
(c) For six years from the Effective Time, the Surviving Corporation shall
provide (to the extent available in the market) to the Company's current
directors and officers liability insurance protection of the same kind and scope
as that provided by the Company's directors' and officers' liability insurance
policies (copies of which have been made available to Parent); PROVIDED,
HOWEVER, that in no event shall the Surviving Corporation be required to expend
more than 200% of the current amount expended by the Company (the "INSURANCE
AMOUNT") to maintain or procure insurance coverage pursuant hereto and further
provided that if the Surviving Corporation is unable to maintain or obtain the
insurance called for by this Section 6.06(c), it shall use its best efforts to
obtain as much comparable insurance as is available for the Insurance Amount.
(d) Following the Effective Time, Parent will fully guaranty the prompt
payment and performance of all obligations of the Surviving Corporation pursuant
to this Section 6.06 and under any and all director and officer indemnification
agreements entered into by the Company and/or any Company Subsidiary.
(e) The obligations of the Company, the Surviving Corporation, and Parent
under this Section 6.06 shall not be terminated or modified in such a manner as
to adversely affect any Indemnified Party without the consent of such affected
party (it being expressly agreed that each such party shall be a third-party
beneficiary of this Section 6.06).
(f) The rights of an Indemnified Party to indemnification and advancement of
expenses under this Section 6.06 shall not be deemed exclusive of any other
rights which the Indemnified Party may at any time be entitled to under
applicable Law, any charter or bylaw provision, any agreement, vote of
stockholders, resolution of disinterested directors or otherwise.
SECTION 6.07. NO SHELF REGISTRATION. Parent shall not be required to amend
or maintain the effectiveness of the Registration Statement for the purpose of
permitting resale of the shares of Parent Common Stock received pursuant hereto
by the persons who may be deemed to be "affiliates" of the Company within the
meaning of Rule 145 promulgated under the Securities Act.
SECTION 6.08. PUBLIC ANNOUNCEMENTS. The initial press release concerning the
Merger shall be a joint press release and, thereafter, Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the Merger and
shall not issue any such press release or make any such public statement without
the prior written approval of the other, except to the extent required by
applicable Law or the requirements of the NYSE, in which case the issuing party
shall use its reasonable efforts to consult with the other party before issuing
any such release or making any such public statement.
SECTION 6.09. PARENT RESTATED CERTIFICATE OF INCORPORATION. As of the
Effective Time, Parent shall cause its Restated Certificate of Incorporation to
be amended to reflect the Certificate Amendment.
SECTION 6.10. STOCK EXCHANGE LISTING. Each of the parties hereto shall use
its reasonable efforts to obtain, prior to the Effective Time, the approval for
listing on the NYSE, effective upon official notice of issuance, of the shares
of Parent Common Stock issuable to the Company's stockholders in the Merger and
upon the exercise of options pursuant to Section 2.04 hereof.
SECTION 6.11. BLUE SKY. Each of the parties hereto shall use all reasonable
efforts to obtain prior to the Effective Time all necessary blue sky permits and
approvals required under Blue Sky Laws to permit the distribution of the shares
of Parent Common Stock to be issued in accordance with the provisions of this
Agreement.
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ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE
MERGER. The obligations of the parties hereto to consummate the Merger, or to
permit the consummation of the Merger, are subject to the satisfaction or, if
permitted by applicable Law, waiver of the following conditions:
(a) the Registration Statement shall have been declared effective by the
SEC under the Securities Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued by the SEC and no
proceeding for that purpose shall have been initiated by the SEC and not
concluded or withdrawn;
(b) this Agreement shall have been duly adopted by the requisite vote of
stockholders of the Company and the matters specified in Section 4.04 shall
have been approved by the requisite vote of stockholders of Parent;
(c) no court of competent jurisdiction shall have issued or entered any
order, writ, injunction or decree, and no other Governmental Entity shall
have issued any order, which is then in effect and has the effect of making
the Merger illegal or otherwise prohibiting its consummation;
(d) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act or any other applicable
competition, merger control or similar Law shall have expired or been
terminated;
(e) all consents, approvals and authorizations legally required to be
obtained to consummate the Merger shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization would not have a Parent Material Adverse Effect
after the Effective Time;
(f) each of Arthur Andersen and Coopers & Lybrand, as the independent
public accountants of the Company and Parent, respectively, shall have
issued the "comfort" letters referred to in Section 5.08(a) and the "pooling
of interests" opinions referred to in Section 5.08(b);
(g) the shares of Parent Common Stock issuable to the Company's
stockholders in the Merger and upon the exercise of options pursuant to
Section 2.04 hereof shall have been authorized for listing on the NYSE,
subject to official notice of issuance; and
(h) the S-3 Registration Statement shall have been declared effective by
the SEC and the "tainted shares" shall have been disposed of thereunder as
contemplated by Section 5.07.
SECTION 7.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger, or to permit the consummation of the
Merger, are subject to the satisfaction or, if permitted by applicable Law,
waiver of the following further conditions:
(a) each of the representations and warranties of Parent contained in
this Agreement that is qualified by materiality shall be true and correct on
and as of the Effective Time as if made at and as of the Effective Time
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date) and
each of the representations and warranties that is not so qualified shall be
true and correct in all material respects on and as of the Effective Time as
if made at and as of the Effective Time (other than representations and
warranties which address matters only as of a certain date which shall be
true and correct in all material respects as of such certain date), in each
case except as contemplated or permitted by this Agreement, and the Company
shall have received a certificate of the Chairman or President and Chief
Financial Officer of Parent to such effect;
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(b) Parent shall have performed or complied in all material respects
with all material agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time and the
Company shall have received a certificate of the Chairman or President and
Chief Financial Officer of Parent to that effect;
(c) no event or events shall have occurred or be reasonably likely to
occur which, individually or in the aggregate, shall have had or could
reasonably be expected to have, a Parent Material Adverse Effect;
(d) the Company shall have received the opinion of Skadden, Arps, Slate,
Meagher & Flom (Illinois), in form and substance reasonably satisfactory to
the Company, based upon facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, to the effect that (i) the Merger will be treated for
federal income tax purposes as a reorganization qualifying under the
provisions of section 368(a) of the Code, and Parent, Merger Sub and the
Company will each be a party to the reorganization, (ii) no gain or loss
will be recognized by Parent, Merger Sub or the Company as a result of the
Merger, and (iii) no gain or loss will be recognized by the stockholders of
the Company who exchange their Company Common Stock solely for Parent Common
Stock pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest). In rendering such opinion, counsel may
require and rely upon representations contained in certificates of officers
of Parent and the Company; and
(e) Parent shall have taken all action necessary to cause the Company
Designees to become members of the Parent Board of Directors, and Mr. Robert
S. Miller to be elected Chairman of the Board of Parent, in each case as of
the Effective Time, as contemplated by Section 6.03.
SECTION 7.03. CONDITIONS TO THE OBLIGATIONS OF PARENT. The obligations of
Parent to consummate the Merger, or to permit the consummation of the Merger,
are subject to the satisfaction or, if permitted by applicable Law, waiver of
the following further conditions:
(a) each of the representations and warranties of the Company contained
in this Agreement that is qualified by materiality shall be true and correct
on and as of the Effective Time as if made at and as of the Effective Time
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date) and
each of the representations and warranties that is not so qualified shall be
true and correct in all material respects on and as of the Effective Time as
if made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and Parent shall have
received a certificate of the Chairman or President and Chief Financial
Officer of the Company to such effect;
(b) the Company shall have performed or complied in all material
respects with all material agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time and Parent shall have received a certificate of the Chairman
or President and Chief Financial Officer of the Company to that effect;
(c) except as set forth on Section 3.08 of the Company Disclosure
Schedule, no event or events shall have occurred or be reasonably likely to
occur which, individually or in the aggregate, shall have had, or could
reasonably be expected to have, a Company Material Adverse Effect, it being
understood that for purposes of determining whether a Company Material
Adverse Effect shall have occurred on the assets, liabilities, financial
condition or results of operations of the Company and the Company
Subsidiaries taken as a whole, actual amounts as at any date of
determination or for any period of determination shall be compared, to the
extent practicable, to the corresponding amounts included in the Company's
1998 business plan included in Section 3.08 of the Company Disclosure
Schedule; and
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(d) Parent shall have received the opinion of Shearman & Sterling, in
form and substance reasonably satisfactory to Parent, based upon facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, to the
effect that (i) the Merger will be treated for federal income tax purposes
as a reorganization qualifying under the provisions of Section 368(a) of the
Code, and Parent, Merger Sub and the Company will each be a party to the
reorganization, (ii) no gain or loss will be recognized by Parent, Merger
Sub or the Company as a result of the Merger, and (iii) no gain or loss will
be recognized by the stockholders of the Company who exchange their Company
Common Stock solely for Parent Common Stock pursuant to the Merger (except
with respect to cash received in lieu of a fractional share interest). In
rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of Parent and the Company.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite adoption of this Agreement, as follows:
(a) by mutual written consent duly authorized by the Boards of Directors
of each of Parent and the Company;
(b) by either Parent or the Company, if the Effective Time shall not
have occurred on or before October 31, 1998; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have caused, or resulted in, the failure of the Effective
Time to occur on or before such date; PROVIDED FURTHER that this Agreement
may be extended not more than 60 days by Parent or the Company by written
notice to the other party if the Merger shall not have been consummated as a
direct result of (i) the Company or Parent having failed to receive all
regulatory approvals or consents required to be obtained by the Company or
Parent with respect to the Merger in order to satisfy the condition set
forth in Section 7.01(e) or (ii) the existence of litigation or any
governmental proceeding seeking to prevent or prohibit consummation of the
Merger;
(c) by either Parent or the Company, if any Governmental Order, writ,
injunction or decree preventing the consummation of the Merger shall have
been entered by any court of competent jurisdiction and shall have become
final and nonappealable;
(d) by Parent, if (i) in accordance with the proviso to Section
6.01(b)(i), the Board of Directors of the Company withdraws, modifies or
changes its recommendation of this Agreement and the Merger in a manner
adverse to Parent or its stockholders or shall have resolved to do so, or if
the Board of Directors of the Company shall have refused to affirm its
recommendation of this Agreement and the Merger as promptly as practicable
(but in any event within three business days) after receipt of any request
by Parent, (ii) the Board of Directors of the Company shall have recommended
to the stockholders of the Company a Competing Transaction or shall have
resolved to do so or (iii) a tender offer or exchange offer for 25 percent
or more of the outstanding shares of capital stock of the Company is
commenced and the Board of Directors of the Company fails to recommend
against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the acceptance
of such tender offer or exchange offer by its stockholders);
(e) by the Company, if (i) in accordance with the proviso to Section
6.01(b)(ii), the Board of Directors of Parent withdraws, modifies or changes
its recommendation of this Agreement and the Merger in a manner adverse to
the Company or its stockholders or shall have resolved to do so, or if the
Board of Directors of Parent shall have refused to affirm its recommendation
of this Agreement
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and the Merger as promptly as practicable (but in any event within three
business days) after receipt of any request by the Company, (ii) the Board
of Directors of Parent shall have recommended to the stockholders of Parent
a Competing Transaction or shall have resolved to do so or (iii) a tender
offer or exchange offer for 25 percent or more of the outstanding shares of
capital stock of Parent is commenced and the Board of Directors of Parent
fails to recommend against acceptance of such tender offer or exchange offer
by its stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders);
(f) by Parent or the Company, (i) if this Agreement shall fail to
receive the requisite votes for adoption at the Company Stockholders'
Meeting or any adjournment or postponement thereof or (ii) if the Share
Issuance or the Certificate Amendment shall fail to receive the requisite
votes for approval at the Parent Stockholders' Meeting or any adjournment or
postponement thereof;
(g) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 7.03 would not be
satisfied (a "TERMINATING COMPANY BREACH"); PROVIDED, HOWEVER, that, if such
Terminating Company Breach is curable by the Company through the exercise of
its reasonable efforts and for so long as the Company continues to exercise
such reasonable efforts, Parent may not terminate this Agreement under this
Section 8.01(g); and PROVIDED FURTHER that the preceding proviso shall not
in any event be deemed to extend any date set forth in paragraph (b) of this
Section 8.01;
(h) by the Company, upon breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Section 7.02 would not be
satisfied (a "TERMINATING PARENT BREACH"); PROVIDED, HOWEVER, that, if such
Terminating Parent Breach is curable by Parent through the exercise of its
reasonable efforts and for so long as Parent continues to exercise such
reasonable efforts, the Company may not terminate this Agreement under this
Section 8.01(h); and PROVIDED FURTHER that the preceding proviso shall not
in any event be deemed to extend any date set forth in paragraph (b) of this
Section 8.01;
(i) by the Company, if the Board of Directors of the Company shall,
following receipt of advice of outside legal counsel (who may be the
Company's regularly engaged outside legal counsel) that failure to so
terminate would be inconsistent with its duties to its stockholders under
applicable Law, in good faith have withdrawn, modified or changed its
recommendation of the adoption of this Agreement and the Merger in a manner
adverse to Parent and, on or prior to such date, any person (other than
Parent) shall have made a public announcement or otherwise communicated to
the Company and its stockholders with respect to a Competing Transaction
that, as determined by the Board of Directors of the Company after
consultation with its outside legal counsel (who may be its regularly
engaged outside legal counsel) and financial advisors, contains terms more
favorable to the stockholders of the Company than those provided for in the
Merger; PROVIDED, HOWEVER, that the Company may not terminate this Agreement
pursuant to this Section 8.01(i) until three business days have elapsed
following delivery to Parent of written notice of such determination of the
Company (which written notice shall inform Parent of the material terms and
conditions of the Competing Transaction); PROVIDED FURTHER, that such
termination under this Section 8.01(i) shall not be effective until the
Company has made payment to Parent of the amounts required to be paid
pursuant to Section 8.05(b); or
(j) by Parent, if the Board of Directors of Parent shall, following
receipt of advice of outside legal counsel (who may be Parent's regularly
engaged outside legal counsel) that failure to so terminate would be
inconsistent with its duties to its stockholders under applicable Law, in
good faith have withdrawn, modified or changed its recommendation of the
approval of this Agreement and the Merger in a manner adverse to the Company
and, on or prior to such date, any person (other than the
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Company) shall have made a public announcement or otherwise communicated to
Parent and its stockholders with respect to a Competing Transaction that, as
determined by the Board of Directors of Parent after consultation with its
outside legal counsel (who may be its regularly engaged outside legal
counsel) and financial advisors, contains terms more favorable to the
stockholders of Parent than those provided for in the Merger; PROVIDED,
HOWEVER, that Parent may not terminate this Agreement pursuant to this
subsection (j) until three business days have elapsed following delivery to
the Company of written notice of such determination of Parent (which written
notice shall inform the Company of the material terms and conditions of the
Competing Transaction); PROVIDED FURTHER, that such termination under this
Section 8.01(j) shall not be effective until Parent has made payment to the
Company of the amounts required to be paid pursuant to Section 8.05(c).
SECTION 8.02. EFFECT OF TERMINATION. Except as provided in Section 9.01, in
the event of termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of Parent or the Company or any of their respective
officers or directors, and all rights and obligations of each party hereto shall
cease, subject to the remedies of the parties hereto set forth in Section
8.05(b) through and including (f); PROVIDED, HOWEVER, that nothing herein shall
relieve any party hereto from liability for the willful or intentional breach of
any of its representations and warranties or the willful or intentional breach
of any of its covenants or agreements set forth in this Agreement; PROVIDED
FURTHER, that the Confidentiality Agreement shall survive any termination of
this Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; PROVIDED, HOWEVER, that, after the adoption of
this Agreement by the stockholders of the Company, no amendment may be made,
except such amendments that have received the requisite stockholder approval and
such amendments as are permitted to be made without stockholder approval under
the DGCL. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for or waive compliance with the performance of
any obligation or other act of any other party hereto or (b) waive any
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
SECTION 8.05. FEES AND EXPENSES. (a) Except as set forth in this Section
8.05, all Expenses incurred in connection with this Agreement and the Merger
shall be paid by the party incurring such Expenses, whether or not the Merger is
consummated, except that Parent and the Company each shall pay one-half of all
Expenses incurred solely for printing, filing and mailing the Registration
Statement and the Joint Proxy Statement and all SEC and other regulatory filing
fees incurred in connection with the Registration Statement and the Joint Proxy
Statement, the fee required to be paid in connection with the HSR Act and the
printing, filing and mailing of the S-3 Registration Statement. "EXPENSES", as
used in this Agreement, shall include all reasonable out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution and performance of its
obligations pursuant to this Agreement and the consummation of the Merger, the
preparation, printing, filing and mailing of the Registration Statement and the
Joint Proxy Statement, the solicitation of stockholder approvals, the filing of
HSR Act notice and all other matters related to the closing of the Merger.
(b) The Company agrees that, if:
(i) the Company shall terminate this Agreement pursuant to Section
8.01(i),
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(ii) (A) Parent shall terminate this Agreement pursuant to Section
8.01(d) and (B) at the time of such termination, there shall exist or be
proposed to the Company a Competing Transaction with respect to the Company,
or
(iii) (A) Parent shall terminate this Agreement pursuant to Section
8.01(f)(i), (B) at the time of such failure to so approve this Agreement,
there shall exist or have been proposed a Competing Transaction that has
been publicly announced or otherwise communicated to the Company and its
stockholders with respect to the Company and (C) within 12 months
thereafter, the Company shall enter into a definitive agreement with respect
to any Competing Transaction or any Competing Transaction shall be
consummated,
then, in the case of (i), prior to such termination, in the case of (ii),
promptly after such termination, or, in the case of (iii), promptly after the
consummation of the Competing Transaction referred to in clause (C), the Company
shall pay to Parent an amount equal to $275 million (the "COMPANY TERMINATION
FEE").
(c) Parent agrees that, if:
(i) Parent shall terminate this Agreement pursuant to Section 8.01(j),
(ii) (A) the Company shall terminate this Agreement pursuant to Section
8.01(e) and (B) at the time of such termination, there shall exist or be
proposed to Parent a Competing Transaction with respect to Parent, or
(iii) (A) the Company shall terminate this Agreement pursuant to Section
8.01(f)(ii), (B) at the time of such failure to so approve this Agreement,
there shall exist or have been proposed a Competing Transaction that has
been publicly announced or otherwise communicated to Parent and its
stockholders with respect to Parent and (C) within 12 months thereafter,
Parent shall enter into a definitive agreement with respect to any Competing
Transaction or any Competing Transaction shall be consummated,
then, in the case of (i), prior to such termination, in the case of (ii),
promptly after such termination, or, in the case of (iii), promptly after the
consummation of the Competing Transaction referred to in clause (C), Parent
shall pay to the Company an amount equal to $183 million (the "PARENT
TERMINATION FEE").
(d) (i) The Company agrees that, if Parent terminates this Agreement
pursuant to Section 8.01(g), the Company shall reimburse Parent for Parent's
Expenses incurred in connection with pursuing the Merger and (ii) Parent agrees
that, if the Company terminates this Agreement pursuant to Section 8.01(h),
Parent shall reimburse the Company for the Company's Expenses incurred in
connection with pursuing the Merger; PROVIDED, HOWEVER, that no party shall be
obligated to reimburse the other party for Expenses in excess of $20 million in
the aggregate.
(e) Any payment required to be made pursuant to Section 8.05(a), (b), (c) or
(d) shall be made to the party entitled to receive such payment not later than
two business days after delivery to the other party of notice of demand for
payment and shall be made by wire transfer of immediately available funds to an
account designated by the party entitled to receive payment in the notice of
demand for payment delivered pursuant to this Section 8.05(e).
(f) In the event that Parent or the Company, as the case may be, shall fail
to pay the Parent Termination Fee or the Company Termination Fee, as the case
may be, the amount of any such Parent Termination Fee or Company Termination Fee
shall be increased to include the costs and expenses actually incurred by the
other (including, without limitation, fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 8.05,
together with interest on such unpaid Parent Termination Fee or Company
Termination Fee, commencing on the date that such Parent Termination Fee or
Company Termination Fee became due, at a rate equal to the rate of interest
publicly announced by Citibank, N.A., from time to time, in The City of New
York, from time to time, as such bank's base rate plus 5.00%.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be. Each party agrees that, except for the representations
and warranties contained in this Agreement, the Parent Disclosure Schedule and
the Company Disclosure Schedule, no party hereto has made any other
representations and warranties, and each party hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the Merger
contemplated herein, notwithstanding the delivery or disclosure to any other
party or any party's representatives of any documentation or other information
with respect to any one or more of the foregoing.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or facsimile, by registered or certified mail (postage prepaid, return receipt
requested) or by a nationally recognized courier service to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.02):
(a) if to the Company:
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60523-1100
Attention: Herbert A. Getz, Esq.
Telecopier: (630) 572-9130
with a copy to:
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606
Attention: Charles W. Mulaney, Jr., Esq.
Telecopier: (312) 407-0411
(b) if to Parent or Merger Sub:
USA Waste Services, Inc.
1001 Fannin Street, Suite 4000
Houston, Texas 77002
Attention: Gregory T. Sangalis, Esq.
Telecopier: (713) 209-9711
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John A. Marzulli, Jr., Esq.
Telecopier: (212) 848-7179
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the following meanings:
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(a) "AFFILIATE" has the meaning specified in Rule 144 promulgated by the
SEC under the Securities Act;
(b) "BENEFICIAL OWNER" with respect to any shares of capital stock means
a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding, or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares of
capital stock;
(c) "BUSINESS DAY" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by law or executive order to close in The City of New
York, USA;
(d) "$" means United States Dollars;
(e) "GOVERNMENTAL ORDER" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Entity;
(f) "KNOWLEDGE" means, with respect to any matter in question, that the
executive officers of Parent or the Company, as the case may be, have actual
knowledge of such matter;
(g) "PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including,
without limitation, a "PERSON" as defined in Section 13(d)(3) of the
Exchange Act), trust, association, entity or government or political
subdivision, agency or instrumentality of a government; and
(h) "SUBSIDIARY" or "SUBSIDIARIES" of any person means any corporation,
limited liability company, partnership, joint venture or other legal entity
of which such person (either alone or through or together with any other
subsidiary of such person) owns, directly or indirectly, more than fifty
percent of the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal entity.
SECTION 9.04. 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 Merger 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 in a mutually acceptable manner to the fullest extent
permitted by applicable Law in order that the Merger may be consummated as
originally contemplated to the fullest extent possible.
SECTION 9.05. ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties hereto. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, other than
Section 6.06, which shall survive the Effective Time and be enforceable by the
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beneficiaries thereof as contemplated by Section 6.06(e), nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 9.06. INCORPORATION OF EXHIBITS. The Parent Disclosure Schedule, the
Company Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part of this Agreement for all
purposes as if fully set forth herein.
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
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 9.08. GOVERNING LAW. Except to the extent that the Laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the Laws of
the State of Delaware. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any New York state or federal
court sitting in the State of Delaware.
SECTION 9.09. CONSENT TO JURISDICTION; VENUE. (a) Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the state courts of
Delaware and to the jurisdiction of the United States District Court for
Delaware for the purpose of any action or proceeding arising out of or relating
to this Agreement, and each of the parties hereto irrevocably agrees that all
claims in respect to such action or proceeding may be heard and determined
exclusively in any Delaware state or federal court sitting in Delaware. Each of
the parties hereto agrees that a final judgment in any action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.
(b) Each of the parties hereto irrevocably consents to the service of any
summons and complaint and any other process in any other action or proceeding
relating to the Merger, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 9.09
shall affect the right of any party hereto to serve legal process in any other
manner permitted by Law.
SECTION 9.10. HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.12. ENTIRE AGREEMENT. This Agreement (including the Exhibits, the
Parent Disclosure Schedule and the Company Disclosure Schedule) and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
A-45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
<TABLE>
<S> <C> <C>
USA WASTE SERVICES, INC.
By: /s/ JOHN E. DRURY
-----------------------------------------
Name: John E. Drury
Title: Chairman of the Board and
Chief Executive Officer
WASTE MANAGEMENT, INC.
By: /s/ R. S. MILLER
-----------------------------------------
Name: R. S. Miller
Title: Chairman of the Board and
Chief Executive Officer
DOME MERGER SUBSIDIARY, INC.
By: /s/ JOHN E. DRURY
-----------------------------------------
Name: John E. Drury
Title: President
</TABLE>
<PAGE>
EXHIBIT 6.04(A)
FORM OF COMPANY AFFILIATE LETTER
USA Waste Services, Inc.
1001 Fannin Street, Suite 4000
Houston, TX 77002
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, IL 60523
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Waste Management, Inc., a Delaware corporation ("COMPANY"), as
the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "RULES AND REGULATIONS") of the
Securities and Exchange Commission (the "COMMISSION") under the Securities Act
of 1933, as amended (the "ACT"), and/or (ii) used in and for purposes of
Accounting Series Releases 130 and 135, as amended, of the Commission. Pursuant
to the terms of the Agreement and Plan of Merger, dated as of March 10, 1998
(the "AGREEMENT"), among USA Waste Services, Inc. ("PARENT"), the Company and
Dome Merger Subsidiary, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("MERGER SUB"), Merger Sub shall be merged with and into
the Company (the "MERGER"), and the stockholders of the Company shall receive
shares of common stock, par value $.01 per share, of Parent ("PARENT COMMON
STOCK"), in exchange for shares of common stock, par value $1.00 per share, of
the Company (the "COMPANY COMMON STOCK").
As a result of the Merger, I may receive shares of Parent Common Stock in
exchange for shares (or upon exercise of options for shares or upon the exercise
by me of rights under certain option plans of the Company that become
exercisable upon the consummation of the Merger) owned by me of Company Common
Stock ("PARENT SECURITIES").
I represent, warrant and covenant to Parent that in the event I receive any
shares of Parent Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of Parent
Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Parent Securities to the
extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent Securities to me
pursuant to the Merger shall be registered with the Securities and Exchange
Commission (the "COMMISSION") under the Act on a Registration Statement on
Form S-4. However, I have also been advised that, since (a) at the time the
Merger shall be submitted for a vote of the stockholders of the Company, I
may be deemed to be an affiliate of the Company and (b) the distribution by
me of Parent Securities has not been registered under the Act, I may not
sell, transfer or otherwise dispose of Parent Securities issued to me in the
Merger unless (i) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition
has been registered under the Act or (iii) in the opinion of counsel
reasonably acceptable to Parent, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. I understand that, except as provided in the Agreement, Parent is
under no obligation to register the sale, transfer or other disposition of
Parent Securities by me or on my behalf under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available.
<PAGE>
E. I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to Parent Securities issued to me and
that there will be placed on the certificates for Parent Securities issued
to me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED BETWEEN THE
REGISTERED HOLDER HEREOF AND USA WASTE SERVICES, INC., A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF USA WASTE SERVICES,
INC."
F. I also understand that, unless the sale or transfer by me of Parent
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Parent reserves the right to put the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with, Parent that to the extent
the consummation of the Merger results in a "change in control" pursuant to
any option plan of the Company and, as a result thereof, I exercise my right
to require Parent to repurchase my outstanding options thereunder, I will
elect to receive Parent Securities as consideration for such repurchase,
notwithstanding any ability I may have under such option plan to receive
cash consideration from Parent (whether as the result of Parent's sale, on
my behalf, of Parent Securities issued to me or otherwise).
H. I further represent to, and covenant with, Parent that I will not
sell, transfer or otherwise dispose of, or execute any cashless exercise of
stock options or warrants for, (i) any Company Common Stock during the 30
days immediately preceding the effective date of the Merger or (ii) any
Parent Securities received by me in the Merger or any other shares of the
capital stock of Parent or enter into any arrangement to reduce my risk
relating to Company Common Stock or such Parent Securities until after such
time as results covering at least 30 days of combined operations of Company
and Parent have been published by Parent, in the form of a quarterly
earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or any
other public filing or announcement which includes such combined results of
operations. Parent shall notify the "affiliates" of the publication of such
results.
<PAGE>
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
<TABLE>
<S> <C>
Very truly yours,
--------------------------------------------
Name:
Accepted this day of
, 1998, by
USA WASTE SERVICES, INC.
By:
- --------------------------------------------
Name:
Title:
WASTE MANAGEMENT, INC.
By:
- --------------------------------------------
Name:
Title:
</TABLE>
<PAGE>
EXHIBIT 6.04(B)
FORM OF PARENT AFFILIATE LETTER
USA Waste Services, Inc.
1001 Fannin Street, Suite 4000
Houston, TX 77002
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, IL 60523
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of USA Waste Services, Inc., a Delaware corporation ("PARENT"),
as the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "RULES AND REGULATIONS") of the
Securities and Exchange Commission (the "COMMISSION") under the Securities Act
of 1933, as amended (the "ACT"), and/or (ii) used in and for purposes of
Accounting Series Releases 130 and 135, as amended, of the Commission. Pursuant
to the terms of the Agreement and Plan of Merger, dated as of March 10, 1998
(the "AGREEMENT"), among Parent, Waste Management, Inc., a Delaware corporation
(the "COMPANY"), and Dome Merger Subsidiary, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB"), Merger Sub shall be merged
with and into the Company (the "MERGER") and the stockholders of the Company
shall receive shares of common stock, par value $.01 per share, of Parent
("PARENT COMMON STOCK"), in exchange for shares of common stock, par value $1.00
per share, of the Company.
I represent to, and covenant with, Parent that I will not sell, transfer or
otherwise dispose of, or execute any cashless exercise of stock options or
warrants for, (i) any Parent Common Stock during the 30 days immediately
preceding the effective date of the Merger or (ii) any other shares of the
capital stock of Parent or enter into any arrangement to reduce my risk relating
to Parent Common Stock until after such time as results covering at least 30
days of combined operations of the Company and Parent have been published by
Parent, in the form of a quarterly earnings report, an effective registration
statement filed with the Securities and Exchange Commission (the "COMMISSION"),
a report to the Commission on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes such combined results of operations. Parent shall
notify the "affiliates" of the publication of such results.
<PAGE>
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Parent as described in the first paragraph of this
letter, or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
<TABLE>
<S> <C>
Very truly yours,
--------------------------------------------
Name:
Accepted this day of
, 1998, by
USA WASTE SERVICES, INC.
By:
- --------------------------------------------
Name:
Title:
WASTE MANAGEMENT, INC.
By:
- --------------------------------------------
Name:
Title:
</TABLE>
<PAGE>
ANNEX B
[LOGO]
As of March 10, 1998
Board of Directors
USA Waste Services, Inc.
1001 Fannin, Suite 4000
Houston, TX 77002
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to USA Waste Services, Inc. ("USA Waste" or the "Company") of the Exchange
Ratio (as defined below) pursuant to the terms of the Agreement and Plan of
Merger (the "Agreement") dated March 10, 1998 among USA Waste, Dome Merger
Subsidiary, Inc. and Waste Management, Inc. ("Waste Management") pursuant to
which Dome Merger Subsidiary, Inc. will be merged (the "Merger") with and into
Waste Management.
Pursuant to the Agreement, each share of common stock, $1.00 par value per
share, of Waste Management ("Waste Management Common Stock") will be converted,
subject to certain exceptions, into the right to receive 0.725 shares (the
"Exchange Ratio") of common stock, $.01 par value per share, of the Company
("Company Common Stock").
In arriving at our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by the Company and Waste Management including information provided during
discussions with their respective managements. Included in the information were
certain financial projections of the Company prepared by the management of the
Company and certain financial projections of Waste Management prepared by the
management of Waste Management. In addition, we have compared certain financial
and securities data of the Company and Waste Management with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the Company Common Stock and Waste
Management Common Stock, reviewed prices and premiums paid in other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company and
Waste Management and their respective representatives or that was otherwise
reviewed by us. In particular, we have relied upon the estimates of the
managements of the Company and Waste Management as to the amount and timing of
certain operating synergies achievable as a result of the proposed Merger and
upon our discussion of such synergies and the timing thereof with the
managements of the Company and Waste Management. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the respective managements of the Company and Waste Management as
to the future operating and financial performance of the Company and Waste
Management. We have assumed that no requisite regulatory consent or approval for
the Merger will impose any condition, including any divestiture requirement,
that will have a material adverse effect on the contemplated benefits of the
Merger. Additionally, we have assumed that the acquisition by Waste Management
of the outstanding minority interest in Wheelabrator Technologies Inc. will be
completed prior to the consummation of the Merger.
We have not assumed any responsibility for making any independent evaluation
of assets or liabilities of the Company or Waste Management or for independently
verifying any of the information reviewed by
B-1
<PAGE>
us. In rendering our opinion, we did not perform any procedures or analysis
regarding potential environmental liabilities of either the Company or Waste
Management, nor did we consider the impact of changes in the regulatory
environment in which the Company and Waste Management operate. We have further
assumed that the Merger will be accounted for as a pooling of interests under
U.S. generally accepted accounting principles. We have relied as to all legal
matters, including that the Merger will be free of federal tax to the Company,
Waste Management and the holders of Company Common Stock and as to a reasonable
estimate of the cost of resolving certain pending litigation of Waste
Management, on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter and does not represent an opinion as to the price at
which shares of the Company Common Stock will trade following the consummation
of the Merger. It should be understood that, although subsequent developments
may affect this opinion, we do not have any obligation to update, revise or
reaffirm this opinion. Our opinion addresses only the fairness of the Exchange
Ratio to the Company from a financial point of view. Our opinion does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company in the past, including (i)
acting as USA Waste's financial advisor in connection with USA Waste's merger
with Western Waste Industries completed in May 1996; (ii) acting as USA Waste's
financial advisor in connection with USA Waste's merger with Sanifill, Inc.
completed in September 1996; (iii) acting as the lead manager in a public
offering of USA Waste common stock and convertible subordinated notes completed
in February 1997; (iv) acting as USA Waste's financial advisor in connection
with USA Waste's merger with United Waste Systems, Inc. completed in August
1997; (v) acting as the lead manager in a public offering of senior notes
completed in September 1997; and (vi) acting as the lead manager in a public
offering of senior notes completed in December 1997. DLJ has performed
investment banking and other services for Waste Management in the past,
including acting as underwriters in connection with numerous debt offerings by
Waste Management. In addition, in the ordinary course of our business, we trade
the securities of the Company and Waste Management for our own account and for
the accounts of customers, and, accordingly, may at any time hold a long or
short position in such securities.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company from a financial
point of view.
<TABLE>
<S> <C> <C>
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ MARK A. PYTOSH
-----------------------------------------
Mark A. Pytosh
MANAGING DIRECTOR
</TABLE>
B-2
<PAGE>
ANNEX C
Investment
Banking
Corporate
and Institutional
Client
Corp
5500
Sears Tower
Chicago,
Illinois 60606
312
906 6200
[LOGO]
June 5, 1998
Board of Directors
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, IL 60521
Members of the Board of Directors
Waste Management, Inc. (the "Company") and USA Waste Services, Inc. ("USA")
have entered into an Agreement and Plan of Merger among USA, its wholly owned
subsidiary ("Merger Sub") and the Company, dated as of March 10, 1998 (the
"Agreement") pursuant to which Merger Sub will be merged into the Company in a
transaction (the "Merger") in which each outstanding share of the Company's
common stock, par value $1.00 per share (the "Company Shares"), will be
converted into the right to receive 0.725 shares (the "Exchange Ratio") of the
common stock of USA, par value $0.01 per share (the "USA Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders of the Company Shares, other than USA and
its affiliates.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and USA that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company and USA, as well as the amount and timing of the cost
savings, related expenses and synergies expected to result from the
Merger (the "Expected Synergies") furnished to us by the Company and USA,
respectively;
(3) Conducted discussions with members of senior management and
representatives of the Company and USA concerning the matters described
in clauses 1 and 2 above, as well as their respective businesses and
prospects before and after giving effect to the Merger and the Expected
Synergies;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and USA Shares and compared them with those of certain publicly
traded companies that we deemed to be relevant;
C-1
<PAGE>
(5) Reviewed the results of operations of the Company and USA and compared
them with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and USA and their financial and legal
advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement;
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or USA or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company or USA. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by the Company or USA, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's or USA's management as to the expected
future financial performance of the Company or USA, as the case may be, and the
Expected Synergies. We have further assumed that the Merger will be accounted
for as a pooling of interests under generally accepted accounting principles and
that it will qualify as a tax-free reorganization for U.S. federal income tax
purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities arising out of
our engagement. We recently advised the Company regarding the purchase of the
shares of Wheelabrator Technologies, Inc. that it did not already own, and have,
in the past, provided financial advisory and financing services to the Company
and USA, and may continue to do so, and have received, and may receive, fees for
the rendering of such services. In addition, in the ordinary course of our
business, we may actively trade the Company Shares and other securities of the
Company, as well as USA Shares and other securities of USA, 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.
C-2
<PAGE>
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any stockholder as to how such stockholder should vote on the proposed Merger or
any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares or USA Shares will trade following the announcement or
consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view to
the holders of the Company Shares, other than USA and its affiliates.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
C-3
<PAGE>
ANNEX D
FORM OF AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION
OF USA WASTE SERVICES, INC.
AMENDMENT TO ARTICLE FIRST OF THE USA WASTE CHARTER
Resolved, that Article First of the Restated Certificate of Incorporation,
as amended, of USA Waste Services, Inc., be deleted in its entirety, and the
following be inserted in its place:
First: The name of the Corporation is "Waste Management, Inc."
AMENDMENT TO ARTICLE FOURTH OF THE USA WASTE CHARTER
Resolved, that the first sentence of Article Fourth of the Restated
Certificate of Incorporation, as amended, of USA Waste Services, Inc., be
deleted in its entirety, and the following be inserted in its place:
Fourth: The total number of shares of capital stock which the
Corporation shall have authority to issue is one billion, five hundred and
ten million (1,510,000,000), divided into one billion, five hundred million
(1,500,000,000) shares of Common Stock of the par value of one cent ($0.01)
per share and ten million (10,000,000) shares of Preferred Stock of the par
value of one cent ($0.01) per share.
D-1
<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 "USA Waste
Charter") contains a provision which eliminates directors' personal liability as
set forth above.
The USA Waste Charter and the Bylaws of USA Waste 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
II-1
<PAGE>
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 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
judgements, 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 March 10, 1998, among USA Waste, Dome Merger Subsidiary and
Waste Management (included as Annex A to the Joint Proxy Statement/ Prospectus which is part of this
Registration Statement).
4.1 Form of Stock Certificate of USA Waste Common Stock (incorporated by reference to Exhibit 4.3 of the
Registrant's Registration Statement on Form S-3, File No. 33-76224).
*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 Skadden, Arps, Slate, Meagher & Flom (Illinois) as to the material United States federal
income tax consequences of the Merger.
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Coopers & Lybrand L.L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
*23.3 Consent of Shearman & Sterling (included in Exhibit 5.1 and Exhibit 8.1 to this Registration Statement).
*23.4 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (included in Exhibit 8.2 to this Registration
Statement).
*23.5 Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
*23.6 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
*24.1 Powers of Attorney (included on the signature page of this Registration Statement).
*99.1 Form of proxy card for the Special Meeting of Stockholders of Waste Management.
*99.2 Form of proxy card for the Special Meeting of Stockholders of USA Waste.
*99.3 Form of Chairman and Chief Executive Officer's Letter to the stockholders of Waste Management.
*99.4 Form of Chairman and Chief Executive Officer's Letter to the stockholders of USA Waste.
*99.5 Form of Notice of Special Meeting of Stockholders of Waste Management.
*99.6 Form of Notice of Special Meeting of Stockholders of USA Waste.
*99.7 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation (included as Annex B to the Joint Proxy
Statement/Prospectus which is part of this Registration Statement).
*99.8 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated (included as Annex C to the Joint Proxy
Statement/Prospectus which is part of this Registration Statement).
*99.9 Consents of persons named to become directors of the Registrant who have not signed this Registration
Statement.
</TABLE>
- ------------------------
* Filed herewith.
(b) Not applicable.
(c) The respective opinions of Donaldson, Lufkin & Jenrette Securities
Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated are
included as Annex B and Annex C, respectively, to the Joint Proxy
Statement/Prospectus which is part of this Registration Statement.
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
II-3
<PAGE>
estimated 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;
(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 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.
II-4
<PAGE>
(e) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Joint 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 OF USA WASTE SERVICES, INC.
Pursuant to the requirements of the Securities Act of 1933, the Registrant
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 this 5th day of June, 1998.
<TABLE>
<S> <C> <C>
USA WASTE SERVICES, INC.
By: /s/ JOHN E. DRURY
-----------------------------------------
John E. Drury
CHIEF EXECUTIVE OFFICER
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John E. Drury, Earl E. DeFrates and Gregory T.
Sangalis, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (including his capacity as a director
and/or officer of USA Waste Services, Inc.) to sign any or all amendments
(including pre-effective and post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
II-6
<PAGE>
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.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JOHN E. DRURY Chairman of the Board, June 5, 1998
- ------------------------------ Chief Executive Officer
John E. Drury and Director (Principal
Executive Officer)
/s/ RODNEY R. PROTO President, Chief Operating June 5, 1998
- ------------------------------ Officer and Director
Rodney R. Proto
/s/ EARL E. DEFRATES Executive Vice President June 5, 1998
- ------------------------------ and Chief Financial
Earl E. DeFrates Officer (Principal
Financial Officer)
/s/ BRUCE E. SNYDER Vice President and Chief June 5, 1998
- ------------------------------ Accounting Officer
Bruce E. Snyder (Principal Accounting
Officer)
/s/ RALPH F. COX Director June 5, 1998
- ------------------------------
Ralph F. Cox
/s/ RICHARD J. HECKMANN Director June 5, 1998
- ------------------------------
Richard J. Heckmann
/s/ RICHARD D. KINDER Director June 5, 1998
- ------------------------------
Richard D. Kinder
/s/ LARRY J. MARTIN Director June 5, 1998
- ------------------------------
Larry J. Martin
/s/ WILLIAM E. MOFFETT Director June 5, 1998
- ------------------------------
William E. Moffett
/s/ ALEXANDER W. RANGOS Director June 5, 1998
- ------------------------------
Alexander W. Rangos
/s/ JOHN G. RANGOS, SR. Director June 5, 1998
- ------------------------------
John G. Rangos, Sr.
/s/ KOSTI SHIRVANIAN Director June 5, 1998
- ------------------------------
Kosti Shirvanian
/s/ DAVID SUTHERLAND-YOEST Director June 5, 1998
- ------------------------------
David Sutherland-Yoest
/s/ JEROME B. YORK Director June 5, 1998
- ------------------------------
Jerome B. York
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER -----------------------------------------------------------------------------------------------------
------
*2.1 Agreement and Plan of Merger, dated as of March 10, 1998, among USA Waste, Dome Merger Subsidiary and
Waste Management (included as Annex A to the Joint Proxy Statement/Prospectus which is part of this
Registration Statement).
4.1 Form of Stock Certificate of USA Waste Common Stock (incorporated by reference to Exhibit 4.3 of the
Registrant's Registration Statement on Form S-3, File No. 33-76224).
<C> <S>
*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 Skadden, Arps, Slate, Meagher & Flom (Illinois) as to the material United States federal
income tax consequences of the Merger.
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Shearman & Sterling (included in Exhibit 5.1 and Exhibit 8.1 to this Registration
Statement).
*23.4 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (included in Exhibit 8.2 to this
Registration Statement).
*23.5 Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
*23.6 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
*24.1 Powers of Attorney (included on the signature page of this Registration Statement).
*99.1 Form of proxy card for the Special Meeting of Stockholders of Waste Management.
*99.2 Form of proxy card for the Special Meeting of Stockholders of USA Waste.
*99.3 Form of Chairman and Chief Executive Officer's Letter to the stockholders of Waste Management.
*99.4 Form of Chairman and Chief Executive Officer's Letter to the stockholders of USA Waste.
*99.5 Form of Notice of Special Meeting of Stockholders of Waste Management .
*99.6 Form of Notice of Special Meeting of Stockholders of USA Waste.
*99.7 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation (included as Annex B to the Joint
Proxy Statement/Prospectus which is part of this Registration Statement).
*99.8 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated (included as Annex C to the Joint Proxy
Statement/Prospectus which is part of this Registration Statement).
*99.9 Consents of persons named to become directors of the Registrant who have not signed this Registration
Statement.
</TABLE>
- ------------------------
* Filed herewith.
<PAGE>
Exhibit 5.1
[LETTERHEAD OF SHEARMAN & STERLING]
June 5, 1998
USA Waste Services, Inc.
1001 Fannin Street
Suite 4000
Houston, Texas 77002
Ladies and Gentlemen:
We have acted as special counsel to USA Waste Services, Inc., a
Delaware corporation ("USA Waste"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") being filed by USA Waste
on the date hereof with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, with respect to 380,625,000 shares of
common stock, par value $.01 per share, of USA Waste (the "Common Stock").
The Common Stock is being registered in connection with the merger (the
"Merger") of Waste Management, Inc., a Delaware corporation ("Waste
Management"), with and into Dome Merger Subsidiary, Inc., a Delaware
corporation and a wholly owned subsidiary of USA Waste ("Dome Merger
Subsidiary"), pursuant to the Agreement and Plan of Merger, dated as of March
10, 1998, among USA Waste, Dome Merger Subsidiary and Waste Management (the
"Agreement"). The Common Stock is described in the Joint 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.
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
<PAGE>
USA Waste Services, Inc. June 5, 1998
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
<PAGE>
Exhibit 8.1
[LETTERHEAD OF SHEARMAN & STERLING]
June 5, 1998
USA Waste Services, Inc.
1001 Fannin Street, Suite 4000
Houston, Texas 77002
Agreement and Plan of Merger among USA Waste Services, Inc.,
Dome Merger Subsidiary, Inc. and Waste Management Inc.,
dated as of March 10, 1998
----------------------------------------------------------------
Ladies and Gentlemen:
You have requested our opinion as to certain United States federal
income tax consequences of the merger (the "Merger") of Dome Merger
Subsidiary, Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned
subsidiary of USA Waste Services, Inc. ("Parent"), a Delaware corporation,
with and into Waste Management, Inc. (the "Company"), a Delaware corporation.
The Merger is being consummated pursuant to the Agreement and Plan of Merger
among Parent, Merger Sub and the Company dated as of March 10, 1998 (the
"Merger Agreement"). Unless otherwise defined, capitalized terms used herein
have the meanings assigned to them in the Merger Agreement.
In connection with rendering our opinion, we have reviewed the Merger
Agreement, including the Exhibits thereto, the Joint Proxy Statement and
Prospectus prepared with respect to the Merger (the "Joint Proxy/Prospectus")
and such other documents and corporate records as we have deemed necessary or
appropriate as a basis therefor. We have assumed that the representations and
warranties contained in the Merger Agreement were true, correct and complete
when made and will continue to be true, correct and complete through the
Effective Time, and that the parties have complied with and, where applicable,
will continue to comply with the covenants contained in the Merger Agreement.
We also have assumed that statements as to factual matters contained in the
Joint Proxy/Prospectus are true, correct and complete, and will continue to be
true, correct and complete through the Effective Time. Finally, we have
relied on the representations made by Parent and the Company in letters to
us dated June 4, 1998, and have assumed that such representations will
continue to be true, correct and complete through the Effective Time.
<PAGE>
2
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 be consummated in
accordance with the terms of the Merger Agreement, it is our opinion that:
1. The Merger Agreement will qualify as a reorganization within the
meaning of Section 368(a) of the Code for United States federal income tax
purposes, and each of Parent, Merger Sub and the Company will be party to the
reorganization within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized for United States federal
income tax purposes by Parent, Merger Sub or the Company as a result of the
Merger.
3. No gain or loss will be recognized for United States federal
income tax purposes by the stockholders of the Company on their exchange of
Company Common Stock solely for Parent Common Stock (except that gain, if
any, will be recognized to the extent of cash received in lieu of a
fractional share interest).
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.
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 such law or practice that may affect our opinion unless we
are specifically retained to do so.
We hereby consent to the filing with the Securities and Exchange
Commission of this opinion as an exhibit to the Registration Statement on
Form S-4 of Parent, of which the Joint Proxy/Prospectus is a part, and to the
use of our name in the sections entitled "The Merger--Certain Federal Income
Tax Consequences" and "Legal Matters" in the Joint Proxy/Prospectus.
Very truly yours,
/s/ Shearman & Sterling
<PAGE>
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)]
Exhibit 8.2
June 5, 1998
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60523
Re USA Waste Services, Inc. Merger
-------------------------------
Ladies and Gentlemen,
We have acted as special counsel to Waste Management, Inc., a Delaware
corporation ("Waste Management"), in connection with the contemplated
merger (the "Merger") of Dome Merger Subsidiary, Inc., a Delaware corporation
("Sub") and a wholly-owned subsidiary of USA Waste Services, Inc., a Delaware
corporation ("USA Waste"), with and into Waste Management, with Waste
Management surviving as a wholly-owned subsidiary of USA Waste, pursuant to
the Agreement and Plan of Merger, dated as of March 10, 1998, among USA
Waste, Sub and Waste Management (the "Merger Agreement"). You have requested
our opinion regarding whether the Merger will be treated for United States
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Unless otherwise defined, capitalized terms used in this opinion have the
meanings assigned to them in the Merger Agreement.
In connection with our opinion, we have reviewed originals or copies,
certified or otherwise identified to our satisfaction, of the Merger
Agreement, the Joint Proxy Statement and Prospectus prepared with respect to
the Merger (the "Joint Proxy/Prospectus") and such other documents,
certificates and records as we have deemed necessary or appropriate as a
basis for the opinion set forth below. We have assumed that the Merger will
be consummated in accordance with the Merger Agreement, the Joint
Proxy/Prospectus and such other documents, certificates and records and that
statements as to factual matters contained in the Joint Proxy/Prospectus are
true, correct and complete and will continue to be true, correct
<PAGE>
Waste Management, Inc.
June 5, 1998
Page 2
and complete through the Effective Time. In rendering our opinion, we have
also relied upon statements and representations of officers and other
representatives of USA Waste and Waste Management and have assumed that such
statements and representations will continue to be true, correct and complete
through the Effective Time.
For purposes of our opinion, we have assumed the legal capacity of
all natural persons, the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such latter
documents. We have also assumed that the Merger will qualify as a statutory
merger under the laws of the State of Delaware.
In rendering our opinion, we have relied on the Code, Treasury
Regulations, judicial authorities, published positions of the Internal
Revenue Service and such other authorities as we have considered relevant,
all as in effect as of the date of this opinion and all of which are subject
to differing interpretations or change at any time (possibly with retroactive
effect). A change in the authorities upon which our opinion is based could
affect our conclusions. This opinion may not apply to Waste Management Common
Stock acquired pursuant to the exercise of an employee stock option or
otherwise as compensation.
On the basis of and subject to the foregoing, we are of the opinion
that for United States federal income tax purposes:
1. The Merger will be treated as a reorganization, qualifying under
the provisions of Section 368(a) of the Code, and USA Waste, Sub and Waste
Management will each be a party to the reorganization within the meaning of
Section 368(b) of the Code.
2. No gain or loss will be recognized by USA Waste, Sub or Waste
Management as a result of the Merger.
3. No gain or loss will be recognized by a stockholder of Waste
Management who exchanges all of his Waste Management Common Stock solely for
USA Waste Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest).
<PAGE>
Waste Management, Inc.
June 5, 1998
Page 3
We express no opinion as to United States federal income tax
consequences other than as set forth above or as to any state, local or
foreign tax consequences. We hereby consent to the references to us in the
sections captioned "The Merger--Certain Federal Income Tax
Consequences" and "Legal Matters" in the Joint Proxy/Prospectus. In giving
this consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the Rules and Regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom (Illinois)
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent pubic accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of USA Waste Services, Inc.
of our report dated February 24, 1998 (except as to the matters disclosed in
Note 19, as to which the date is March 17, 1998) included or incorporated by
reference in Waste Management, Inc.'s Form 10-K for the year ended December 31,
1997, and to all references to our Firm included in this Registration Statement.
Arthur Andersen LLP
Chicago, Illinois
June 4, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
USA Waste Services, Inc. on Form S-4, relating to the Waste Management, Inc.
merger, 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" in the Joint Proxy
Statement/Prospectus which is part of this Registration Statement.
Coopers & Lybrand L.L.P.
Houston, Texas
June 5, 1998
<PAGE>
Exhibit 23.5
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
Board of Directors
USA Waste Services, Inc.
1001 Fannin, Suite 4000
Houston, TX 77002
We hereby consent to the inclusion of our opinion letter, dated as of
March 10, 1998, to the Board of Directors of USA Waste Services, Inc. ("USA
Waste") as Annex B to the Joint Proxy Statement/Prospectus which forms a part of
the Registration Statement on Form S-4 relating to the merger of USA Waste and
Waste Management, Inc, and to the references therein to Donaldson, Lufkin &
Jenrette Securities Corporation under the captions "Summary-Opinions of
Financial Advisors," "The Merger-Background of the Merger," "The Merger-Reasons
for the Merger; Recommendations of the Board of Directors," and "The
Merger-Opinions of Financial Advisors." In giving such 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 purposes of, the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
New York, New York
June 5, 1998
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
By: /s/ Mark A. Pytosh
-------------------------------------
Name: Mark A. Pytosh
Title: Managing Director
<PAGE>
Exhibit 23.6
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion letter dated June 5,
1998 to the Board of Directors of Waste Management, Inc, included as Annex C to
the Joint Proxy Statement/Prospectus which forms a part of the Registration on
Form S-4 relating to the proposed merger of Dome Merger Subsidiary, Inc., a
wholly owned subsidiary of USA Waste Services, Inc. with and into Waste
Management, Inc. and to the references to such opinion in such Joint Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
June 5, 1998
<PAGE>
[Front of Proxy Card]
WASTE MANAGEMENT, INC.
3003 BUTTERFIELD ROAD
OAK BROOK, ILLINOIS 60523
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF WASTE MANAGEMENT, INC.
The undersigned hereby appoints Robert S. Miller, Peer Pedersen and James R.
Peterson and each of them with full power to act without the others, as proxies,
with full power of substitution, to represent and to vote on behalf of the
undersigned all of the shares of common stock, par value $1.00 per share, of
Waste Management, Inc. ("Waste Management") which the undersigned is entitled in
any capacity to vote if personally present at the Special Meeting of
Stockholders of Waste Management to be held at the offices of Harris Trust and
Savings Bank, 111 West Monroe Street, Chicago, Illinois, on Wednesday, July 15,
1998 at 2:00 p.m., local time, and at any and all adjournments or postponements
thereof, upon the proposals listed on the reverse side of this Proxy and more
fully described in the Notice of Special Meeting of Stockholders dated June
[ ], 1998 and the Waste Management and USA Waste Services, Inc. Joint Proxy
Statement/Prospectus dated June [ ], 1998 and, in their discretion, upon all
matters incident to the conduct of the Special Meeting and upon all matters
presented at the Special Meeting but which were not known to the Board of
Directors at a reasonable time before the solicitation of this proxy.
THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED AND, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED FOR THE PROPOSAL SET FORTH ON THE REVERSE HEREOF AND IN
THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE SPECIAL MEETING. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS AND THE JOINT PROXY STATEMENT/PROSPECTUS
(WITH ALL ENCLOSURES AND ATTACHMENTS) DATED JUNE [ ], 1998 RELATED TO THE
SPECIAL MEETING.
IMPORTANT -- THIS PROXY MUST BE COMPLETED, SIGNED AND DATED ON THE REVERSE SIDE.
(Continued on reverse side)
<PAGE>
[Back of Proxy Card]
/X/ Please mark your votes as in this example.
THE WASTE MANAGEMENT BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING
PROPOSAL:
1. Proposal to approve and adopt the Agreement and Plan of Merger, dated as of
March 10, 1998, among USA Waste Services, Inc., a Delaware corporation ("USA
Waste"), Dome Merger Subsidiary, Inc., a Delaware corporation and a
wholly-owned subsidiary of USA Waste ("Dome Merger Subsidiary"), and Waste
Management, pursuant to which, among other things, (a) Dome Merger
Subsidiary will be merged with and into Waste Management, which will be the
surviving corporation, and Waste Management will become a wholly-owned
subsidiary of USA Waste and (b) each outstanding share of common stock, par
value $1.00 per share, of Waste Management will be converted into the right
to receive 0.725 of a share of common stock, par value $0.01 per share, of
USA Waste.
/ / FOR / / AGAINST / / ABSTAIN
Please sign name exactly as imprinted (do not print). Please include any
changes in address. If shares are held jointly, EACH holder should sign.
Executors, administrators, trustees, guardians and others signing in a
representative capacity should indicate the capacity in which they sign. An
authorized officer may sign on behalf of a corporation and should indicate the
name of the corporation and his or her capacity.
- -------------------------------------------------------------------- Dated:
- ------------------------------------------------
Signature
- -------------------------------------------------------------------- Dated:
- ------------------------------------------------
Signature if held jointly
PLEASE MARK, DATE AND RETURN THIS PROXY PROMPTLY.
<PAGE>
[Front of Proxy Card]
USA WASTE SERVICES, INC.
SPECIAL MEETING OF STOCKHOLDERS
JULY 15, 1998
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF USA WASTE SERVICES, INC.
The undersigned hereby appoints John E. Drury, Earl E. DeFrates and Gregory
T. Sangalis, and each of them with full power to act without the others, as
proxies, with full power of substitution, to represent and to vote on behalf of
the undersigned all of the shares of common stock, par value $0.01 per share, of
USA Waste Services, Inc. ("USA Waste") which the undersigned is entitled in any
capacity to vote if personally present at the Special Meeting of Stockholders of
USA Waste to be held in Houston, Texas, on July 15, 1998 at 3:00 p.m., local
time, and at any and all adjournments or postponements thereof, upon the
proposals listed on the reverse side of this Proxy and more fully described in
the Notice of Special Meeting of Stockholders and the USA Waste and Waste
Management, Inc. Joint Proxy Statement/ Prospectus related to the Special
Meeting, and, in their discretion, upon all matters incident to the conduct of
the Special Meeting and upon all matters presented at the Special Meeting but
which were not known to the Board of Directors at a reasonable time before the
solicitation of this proxy.
THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED AND, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED FOR EACH PROPOSAL SET FORTH ON THE REVERSE HEREOF AND IN
THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE SPECIAL MEETING. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS AND THE JOINT PROXY STATEMENT/PROSPECTUS
(WITH ALL ENCLOSURES AND ATTACHMENTS) RELATED TO THE SPECIAL MEETING.
IMPORTANT -- THIS PROXY MUST BE COMPLETED, SIGNED AND DATED ON THE REVERSE SIDE.
(Continued on reverse side)
<PAGE>
[Back of Proxy Card]
/X/ Please mark your votes as in this example.
THE USA WASTE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING
PROPOSALS:
1. Proposal to amend USA Waste's Restated Certificate of Incorporation to (a)
increase the number of authorized shares of USA Waste common stock, par
value $0.01 per share ("USA Waste Common Stock"), from 500,000,000 to
1,500,000,000 and (b) change the name of USA Waste to "Waste Management,
Inc.", in each case, at the time of the merger (the "Merger") contemplated
by the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
March 10, 1998, among USA Waste, Dome Merger Subsidiary, Inc., a wholly
owned subsidiary of USA Waste, and Waste Management, Inc. ("Waste
Management").
/ / FOR / / AGAINST / / ABSTAIN
2. Proposal to issue up to 380,625,000 shares of USA Waste Common Stock in
exchange for shares of common stock, par value $1.00 per share, of Waste
Management, pursuant to the Merger Agreement.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to approve an amendment to the USA Waste Services, Inc. Amended and
Restated 1993 Stock Incentive Plan increasing the aggregate number of shares
of USA Waste Common Stock that may be issued thereunder from 16,500,000 to
26,500,000.
/ / FOR / / AGAINST / / ABSTAIN
4. Proposal to approve an amendment to the USA Waste Services, Inc. 1996 Stock
Option Plan for Non-Employee Directors increasing the aggregate number of
shares of USA Waste Common Stock that may be issued thereunder from 400,000
to 1,400,000.
/ / FOR / / AGAINST / / ABSTAIN
Please sign name exactly as imprinted (do not print). Please include any
changes in address. If shares are held jointly, EACH holder should sign.
Executors, administrators, trustees, guardians and others signing in a
representative capacity should indicate the capacity in which they sign. An
authorized officer may sign on behalf of a corporation and should indicate the
name of the corporation and his or her capacity.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------ Dated:
------------------------------------------------
Signature
- ------------------------------------------------------ Dated: ------------------------------------
Signature if held jointly
</TABLE>
PLEASE MARK, DATE AND RETURN THIS PROXY PROMPTLY.
<PAGE>
WASTE MANAGEMENT, INC.
3003 BUTTERFIELD ROAD
OAK BROOK, ILLINOIS 60523
Dear Stockholder:
On March 10, 1998, Waste Management, Inc. ("Waste Management") entered into
an agreement and plan of merger (the "Merger Agreement") to merge with a
wholly-owned subsidiary of USA Waste Services, Inc. ("USA Waste"). Pursuant to
the Merger Agreement, each share of Waste Management common stock will be
converted into the right to receive 0.725 of a share of USA Waste common stock
and Waste Management will become a wholly-owned subsidiary of USA Waste. The
shares of USA Waste common stock to be issued to Waste Management stockholders
in the merger will represent approximately 60% of the outstanding shares of USA
Waste common stock after the merger. You will be asked to consider and approve
the Merger Agreement at a Special Meeting of Stockholders on Wednesday, July 15,
1998. The accompanying Joint Proxy Statement/Prospectus presents the details of
the proposed merger.
WASTE MANAGEMENT'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL AND ADOPTION.
Your Board of Directors believes that this strategic combination will result
in the creation of a strong industry leader with an outstanding asset base and
the most talented corporate and field management team in the waste services
business. We expect the merger will provide the combined company with the
opportunity to achieve significant cost savings through operating synergies and
enhanced efficiencies. These cost savings, coupled with a strategy to focus on
new opportunities for revenue growth within the waste management services
marketplace that we know so well, should make "New Waste Management" a powerful
cash generator and allow us to reach our goal of growing operating earnings at a
very favorable rate for the next several years.
FOR FURTHER INFORMATION REGARDING THE MERGER, I URGE THAT YOU READ CAREFULLY
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND, SPECIFICALLY, THE SECTION
ENTITLED "THE MERGER -- REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF
DIRECTORS". If you have more questions about the merger or would like
additional copies of the accompanying Joint Proxy Statement/Prospectus, you
should contact: Waste Management Shareholder Services, P.O. Box 1400,
Pittsburgh, Pennsylvania 15230; telephone (800) 443-6474. 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,
Robert S. Miller
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
<PAGE>
USA WASTE SERVICES, INC.
1001 FANNIN, SUITE 4000
HOUSTON, TEXAS 77002
June [ ], 1998
Dear Stockholder:
As most of you are aware, USA Waste Services, Inc. ("USA Waste") has entered
into an agreement with Waste Management, Inc. ("Waste Management") pursuant to
which Waste Management will merge with, and become, a wholly owned subsidiary of
USA Waste. In the merger, each share of Waste Management common stock will be
converted into the right to receive 0.725 of a share of USA Waste common stock.
At a Special Meeting of Stockholders of USA Waste on Wednesday, July 15, 1998,
you will be asked to consider and approve several matters required to implement
the merger: amendments to the USA Waste charter, to become effective at the time
of the merger, to increase the number of authorized shares of USA Waste common
stock and to change the name of USA Waste to "Waste Management, Inc."; the
issuance of shares of USA Waste common stock to current Waste Management
stockholders in the merger; and amendments to the USA Waste Amended and Restated
1993 Stock Incentive Plan and the USA Waste 1996 Stock Option Plan for
Non-Employee Directors, to increase the aggregate number of shares of USA Waste
common stock that may be issued thereunder. The accompanying Joint Proxy
Statement/Prospectus presents the details of this proposed strategic merger.
USA WASTE'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE CHARTER AMENDMENTS REFERRED TO ABOVE, THE ISSUANCE OF SHARES OF
USA WASTE COMMON STOCK TO CURRENT WASTE MANAGEMENT STOCKHOLDERS IN THE MERGER
AND THE AMENDMENTS TO USA WASTE'S STOCK OPTION AND INCENTIVE PLANS REFERRED TO
ABOVE, AND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF SUCH PROPOSALS.
Your Board of Directors believes that the merger represents a unique
strategic fit between two companies with similar business operations and
complementary geographical presence. The Board of Directors believes that the
merger should result in significant synergies for the combined company and a
number of other important advantages for USA Waste stockholders. For further
information regarding the merger, I urge that you read carefully the
accompanying Joint Proxy Statement/Prospectus and, specifically, the section
entitled "The Merger -- Reasons for the Merger; Recommendations of the Boards of
Directors."
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,
John E. Drury
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
<PAGE>
WASTE MANAGEMENT, INC.
3003 BUTTERFIELD ROAD
OAK BROOK, ILLINOIS 60523
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 15, 1998
To the Stockholders of
WASTE MANAGEMENT, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Waste
Management Special Meeting") of Waste Management, Inc., a Delaware corporation
("Waste Management"), will be held on Wednesday, July 15, 1998, at the offices
of Harris Trust and Savings Bank, 111 West Monroe Street, Chicago, Illinois,
commencing at 2:00 p.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 (the "Merger Agreement"), dated as of March 10, 1998,
among USA Waste Services, Inc., a Delaware corporation ("USA Waste"),
Dome Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned
subsidiary of USA Waste ("Dome Merger Subsidiary"), and Waste Management,
pursuant to which, among other things (a) Dome Merger Subsidiary will be
merged with and into Waste Management, which will be the surviving
corporation, and Waste Management will become a wholly-owned subsidiary
of USA Waste and (b) each outstanding share of common stock, par value
$1.00 per share, of Waste Management will be converted into the right to
receive 0.725 of a share of common stock, par value $0.01 per share, of
USA Waste.
2. To transact such other business as may properly be brought before the
Waste Management Special Meeting or any adjournment or postponement of
the Waste Management Special Meeting.
A copy of the Merger Agreement is attached as Annex A to the accompanying
Joint Proxy Statement/ Prospectus.
Stockholders of record at the close of business on June 9, 1998 are entitled
to notice of, and to vote at, the Waste Management Special Meeting and any
adjournment or postponement of the Waste Management Special Meeting.
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,
Herbert A. Getz
SENIOR VICE PRESIDENT AND SECRETARY
Oak Brook, Illinois
June [ ], 1998
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.
<PAGE>
USA WASTE SERVICES, INC.
1001 FANNIN, SUITE 4000
HOUSTON, TEXAS 77002
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 15, 1998
To the Stockholders of
USA WASTE SERVICES, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "USA
Waste Special Meeting") of USA Waste Services, Inc., a Delaware corporation
("USA Waste"), will be held on Wednesday, July 15, 1998, at the Four Seasons
Hotel, 1300 Lamar, Houston, Texas, commencing at 3:00 p.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to amend USA Waste's Restated
Certificate of Incorporation to (a) increase the number of authorized
shares of USA Waste common stock, par value $0.01 per share ("USA Waste
Common Stock"), from 500,000,000 to 1,500,000,000 and (b) change the name
of USA Waste to "Waste Management, Inc.", in each case, at the time of
the merger (the "Merger") contemplated by the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of March 10, 1998, among USA
Waste, Dome Merger Subsidiary, Inc., a Delaware corporation and a
wholly-owned subsidiary of USA Waste, and Waste Management, Inc., a
Delaware corporation ("Waste Management").
2. To consider and vote upon a proposal to issue up to 380,625,000 shares
of USA Waste Common Stock in exchange for shares of common stock, par
value $1.00 per share, of Waste Management pursuant to the Merger
Agreement.
3. To consider and vote upon a proposal to approve an amendment to the USA
Waste Amended and Restated 1993 Stock Incentive Plan increasing the
aggregate number of shares of USA Waste Common Stock that may be issued
under such Plan from 16,500,000 to 26,500,000.
4. To consider and vote upon a proposal to approve an amendment to the USA
Waste 1996 Stock Option Plan for Non-Employee Directors increasing the
aggregate number of shares of USA Waste Common Stock that may be issued
under such Plan from 400,000 to 1,400,000.
5. To transact such other business as may properly be brought before the
USA Waste Special Meeting or any adjournment or postponement of the USA
Waste Special Meeting.
A copy of the Merger Agreement and of the proposed amendments to USA Waste's
Restated Certificate of Incorporation are attached as Annex A and Annex D,
respectively, to the accompanying Joint Proxy Statement/Prospectus.
Stockholders of record at the close of business on June 9, 1998 are entitled
to notice of, and to vote at, the USA Waste Special Meeting and any adjournment
or postponement of the USA Waste Special Meeting.
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,
Gregory T. Sangalis
VICE PRESIDENT AND SECRETARY
Houston, Texas
June [ ], 1998
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.
<PAGE>
Exhibit 99.9
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, H. Jesse Arnelle, hereby consent to be named as a person about to
become a director of USA Waste Services, Inc. in the Registration Statement
on Form S-4 (the "Registration Statement") of USA Waste Services, Inc. (which
will be renamed "Waste Management, Inc." upon consummation of the merger
described in the Registration Statement).
Dated: June 2, 1998 /s/ H. Jesse Arnelle
-----------------------------------
<PAGE>
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Pastora San Juan Cafferty, hereby consent to be named as a person
about to become a director of USA Waste Services, Inc. in the Registration
Statement on Form S-4 (the "Registration Statement") of USA Waste Services,
Inc. (which will be renamed "Waste Management, Inc." upon consummation of the
merger described in the Registration Statement).
Dated: June 2, 1998 /s/ Pastora San Juan Cafferty
-----------------------------------
<PAGE>
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Roderick M. Hills, hereby consent to be named as a person about
to become a director of USA Waste Services, Inc. in the Registration
Statement on Form S-4 (the "Registration Statement") of USA Waste Services,
Inc. (which will be renamed "Waste Management, Inc." upon consummation of the
merger described in the Registration Statement).
Dated: June 2, 1998 /s/ Roderick M. Hills
-----------------------------------
<PAGE>
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Robert S. Miller, hereby consent to be named as a person about to
become a director of USA Waste Services, Inc. in the Registration Statement
on Form S-4 (the "Registration Statement") of USA Waste Services, Inc. (which
will be renamed "Waste Management, Inc." upon consummation of the merger
described in the Registration Statement).
Dated: June 2, 1998 /s/ Robert S. Miller
-----------------------------------
<PAGE>
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Paul M. Montrone, hereby consent to be named as a person about to
become a director of USA Waste Services, Inc. in the Registration Statement
on Form S-4 (the "Registration Statement") of USA Waste Services, Inc. (which
will be renamed "Waste Management, Inc." upon consummation of the merger
described in the Registration Statement).
Dated: June 2, 1998 /s/ Paul M. Montrone
-----------------------------------
<PAGE>
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, John C. Pope, hereby consent to be named as a person about to
become a director of USA Waste Services, Inc. in the Registration Statement
on Form S-4 (the "Registration Statement") of USA Waste Services, Inc. (which
will be renamed "Waste Management, Inc." upon consummation of the merger
described in the Registration Statement).
Dated: June 2, 1998 /s/ John C. Pope
-----------------------------------
<PAGE>
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Steven G. Rothmeier, hereby consent to be named as a person about
to become a director of USA Waste Services, Inc. in the Registration
Statement on Form S-4 (the "Registration Statement") of USA Waste Services,
Inc. (which will be renamed "Waste Management, Inc." upon consummation of the
merger described in the Registration Statement).
Dated: June 2, 1998 /s/ Steven G. Rothmeier
-----------------------------------
<PAGE>
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Ralph V. Whitworth, hereby consent to be named as a person about
to become a director of USA Waste Services, Inc. in the Registration
Statement on Form S-4 (the "Registration Statement") of USA Waste Services,
Inc. (which will be renamed "Waste Management, Inc." upon consummation of the
merger described in the Registration Statement).
Dated: June 5, 1998 /s/ Ralph V. Whitworth
-----------------------------------
