<PAGE> 1
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NUMBER 333-80063
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED
FEBRUARY 14, 2000)
239,416 SHARES
WASTE MANAGEMENT, INC.
COMMON STOCK
-----------------------------
Our common stock is listed on the New York Stock Exchange under the
trading symbol "WMI." On June 23, 2000, the last reported sale price of the
common stock on the New York Stock Exchange was $17.125 per share.
We will issue the shares directly to certain persons in order to settle
litigation. The shares will be issued to those persons based upon an agreed
dollar value of shares in relation to the closing price of our common stock on
the New York Stock Exchange on a specific trading date. We will not receive any
proceeds from the issuance of these shares.
Investing in the common stock involves risks that are described in the
"Risk Factors" section beginning on page 4 of the accompanying prospectus.
-----------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------
We expect to deliver the shares against payment therefor in Houston,
Texas on or about June 30, 2000.
-----------------------------
Prospectus Supplement dated June 28, 2000
<PAGE> 2
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY WASTE MANAGEMENT. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OFFERED HEREBY, NOR DO THEY CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY TO
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL
UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN OR THEREIN
IS CORRECT AS OF A DATE SUBSEQUENT TO THEIR RESPECTIVE DATES.
-----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
The Company.................................................................S-3
Plan of Distribution........................................................S-4
PROSPECTUS
Where To Find More Information............................................... 2
Our Company.................................................................. 4
Risk Factors................................................................. 4
Special Note Regarding Forward-Looking Statements........................... 11
Use of Proceeds............................................................. 12
Ratios of Earnings to Fixed Charges......................................... 12
Description of Debt Securities.............................................. 13
Description of Capital Stock................................................ 41
Plan of Distribution........................................................ 43
Validity of Securities...................................................... 44
Experts..................................................................... 44
</TABLE>
S-2
<PAGE> 3
THE COMPANY
OVERVIEW
We are one of the largest publicly-owned companies providing integrated
waste management services in North America. We provide solid waste management
services throughout the United States and Puerto Rico, as well as in Canada and
Mexico, including collection, transfer, recycling and resource recovery
services, and disposal services, including the landfill disposal of hazardous
wastes. In addition, we are a leading developer, operator and owner of
waste-to-energy facilities in the United States. We also currently operate in
Europe, the Pacific Rim, South America and other select international markets.
However, we are currently divesting of our international operations pursuant to
our strategic plan, announced in the third quarter 1999. Our diversified
customer base includes commercial, industrial, municipal and residential
customers, other waste management companies, governmental entities and
independent power markets.
RECENT DEVELOPMENTS
During May and June 2000, we announced that our wholly owned
subsidiaries had completed previously announced transactions to sell waste
services operations in Italy, Australia and Germany, as well as our nuclear
waste services operations in the U.S. Additionally, in June 2000, we announced
that one of our wholly owned subsidiaries had reached an agreement to sell its
waste services operations in the United Kingdom to Severn Trent Plc for
approximately U.S. $570 million. The sale, which is subject to the approval of
regulatory authorities and other customary conditions, is expected to be
completed in the third quarter of 2000.
On June 21, 2000, we announced that we agreed to a settlement with the
Securities and Exchange Commission related to our disclosures of information
about expected earnings and revenues for the second quarter of 1999. In the
settlement, we consented, without admitting or denying the SEC's findings, to
the SEC's entry of an administrative order that we cease and desist from
committing or causing violations of certain of the antifraud, books and records,
and internal controls provisions of the federal securities laws. Specifically,
the SEC's Order finds that, at least by June 9, 1999, we were aware of
sufficient adverse information about our second quarter performance to make our
continued support of public forecasts unreasonable. On July 6, 1999, we
announced that both our second quarter revenues and earnings per share would be
lower than previously anticipated. The SEC order assessed no monetary penalty or
fine against us. As previously disclosed, we cooperated fully with the SEC in
its inquiry.
S-3
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PLAN OF DISTRIBUTION
We will issue the shares directly to certain persons in order to settle
litigation and other claims or to satisfy judgments or arbitration awards. We
will not receive any cash proceeds from these issuances but will eliminate an
actual or potential liability.
S-4
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PROSPECTUS
$3,000,000,000
WASTE MANAGEMENT, INC.
DEBT SECURITIES
COMMON STOCK
We may offer from time to time
o Debt securities
o Shares of our common stock
Our shares of common stock are listed on the New York Stock Exchange under the
symbol "WMI."
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4.
We will provide a prospectus supplement each time we issue the
securities covered by this prospectus. The prospectus supplement will provide
specific information about the terms of that offering and also may add, update
or change information contained in this prospectus.
You should read this prospectus and the related prospectus supplement
carefully before you invest in our securities. This prospectus may not be used
to offer and sell our securities unless accompanied by a prospectus supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 14, 2000.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Where To Find More Information............................................. 2
Our Company................................................................ 4
Risk Factors............................................................... 4
Special Note Regarding Forward-Looking Statements.......................... 11
Use of Proceeds............................................................ 12
Ratios of Earnings to Fixed Charges................... .................... 12
Description of Debt Securities............................................. 13
Description of Capital Stock............................................... 41
Plan of Distribution....................................................... 43
Validity of Securities..................................................... 44
Experts.................................................................... 44
</TABLE>
WHERE TO FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 (Reg. No. 333-80063) with respect to the
securities we are offering. This prospectus does not contain all the information
contained in the registration statement, including its exhibits and schedules.
You should refer to the registration statement, including the exhibits and
schedules, for further information about us and the securities we are offering.
Statements we make in this prospectus about certain contracts or other documents
are not necessarily complete. When we make such statements, we refer you to the
copies of the contracts or documents that are filed as exhibits to the
registration statement, because those statements are qualified in all respects
by reference to those exhibits. The registration statement, including exhibits
and schedules, is on file at the offices of the Commission and may be inspected
without charge. We file annual, quarterly and current reports, proxy statements
and other information with the Commission. Our Commission filings, including the
registration statement, are available to the public over the Internet at the
SEC's web site at http://www.sec.gov. You can also read and copy any document we
file at:
o the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and
o the regional offices of the Commission located at:
o 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and
o 7 World Trade Center, Suite 1300, New York, New
York 10048.
Please call the Commission at 1-800-SEC-0330 for more information about
the public reference facilities.
You can also inspect material filed by us at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, on which shares
of our common stock are listed.
We are incorporating by reference in this prospectus some information
we file with the Commission. This means that we are disclosing important
information to you by referring you to those documents. Specifically, we
incorporate by reference the documents set forth below that we have previously
filed with the Commission:
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<TABLE>
<CAPTION>
COMMISSION FILINGS (FILE NO. 1-12154) PERIOD/DATE
<S> <C> <C>
o Annual Report on Form 10-K Year ended December 31, 1998
o Quarterly Report on Form 10-Q Quarter ended March 31, 1999
(certain items in financial
statements were revised in June
30, 1999 Form 10-Q)
o Quarterly Report on Form 10-Q Quarter ended June 30, 1999
o Quarterly Report on Form 10-Q Quarter ended September 30, 1999
(as amended on Form 10-Q/A)
o Current Report on Form 8-K August 13, 1999
o Current Report on Form 8-K September 16, 1999
o Current Report on Form 8-K February 10, 2000
o Proxy Statement for the 1999 Annual
Meeting of Stockholders April 5, 1999
</TABLE>
We also incorporate by reference the information contained in any
future filings made with the Commission under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act until we sell all of the securities covered by
this prospectus, which information will be deemed to automatically update and
supersede this information.
YOU MAY REQUEST A COPY OF THESE FILINGS AT NO COST, BY WRITING OR
TELEPHONING US AT THE FOLLOWING ADDRESS:
WASTE MANAGEMENT, INC.
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
ATTN: SECRETARY
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OUR COMPANY
We are a global leader in providing integrated waste management
services.
In North America, where we have our principal operations, we provide
solid waste collection, transfer, recycling, resource recovery and disposal
services. We also are a leading operator and owner of waste-to-energy and
waste-fuel powered independent power facilities in the United States. We conduct
other operations in North America, including landfill disposal of hazardous
wastes, additional hazardous waste management services and low-level and other
radioactive waste services.
Outside of North America, we operate in Europe, the Pacific Rim, South
America and other select international markets, where we provide collection and
transportation services for solid, hazardous and medical wastes and collection,
treatment and disposal services for recyclable materials. We also operate solid
and hazardous waste landfills, municipal and hazardous waste incinerators, waste
and wastewater treatment facilities and hazardous waste treatment facilities, as
well as construct waste treatment or disposal facilities for third parties.
Our diversified customer base includes commercial, industrial,
municipal and residential customers, other waste management companies,
governmental entities and independent power markets.
On July 16, 1998, we changed our name to "Waste Management, Inc.," from
"USA Waste Services, Inc." On that date, we acquired all of the shares of Waste
Management Holdings, Inc., which at the time was the largest publicly traded
waste management services company in North America and which operated under the
"Waste Management" name.
Our executive offices are located at 1001 Fannin Street, Suite 4000,
Houston, Texas 77002, and our telephone number is (713) 512-6200.
RISK FACTORS
In addition to the information set forth in this prospectus, you should
carefully consider the risks described below before making an investment in the
securities offered. The risks described below are not the only ones facing us.
There may be additional risks not presently known to us or that we currently
deem immaterial which may also impair our business operations.
Accounting charges have negatively impacted reported financial results, resulted
in the impairment of the value of certain assets and may decrease our future
cash flows
During the third quarter of 1999, we initiated a comprehensive review
of our accounting records, systems, processes and controls at the direction of
our Board of Directors, which was completed in November 1999. As a result of
this review, we recorded certain charges and adjustments in the quarter ended
September 30, 1999 totaling $1.23 billion after tax. Because of the size of the
charges, generally accepted accounting principles require us to attempt to
determine whether portions of the charges apply to prior periods. While we
believe that certain of these charges may relate to prior periods, we do not
currently have sufficient information to identify all specific charges
attributable to prior periods. Producing the information required to identify
these charges would be cost prohibitive and disruptive to our operations.
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Some of the charges and adjustments we recorded in the third quarter
1999, such as certain increases in insurance reserves, environmental reserves,
loss contract provisions and adjustments resulting from completing account
reconciliations, are recurring in nature, and should therefore be expected to
occur in future periods. Additionally, certain of these charges and adjustments,
including receivables-related adjustments and insurance reserves, could have an
impact on our future cash flows.
Because some of the charges discussed above affect account balances
applicable to periods prior to the quarter ended September 30, 1999, we
concluded, after consultation with our independent public accountants, that our
internal controls for the preparation of interim financial information did not
provide an adequate basis for them to complete reviews of the quarterly data for
the quarters in the nine months ended September 30, 1999. The review was
completed in November 1999, and we do not anticipate any additional material
adjustments to our financial statements based on the review. However, we may not
be able to successfully stabilize our accounting systems and procedures, and
close our accounting records and report our 1999 annual results in accordance
with year end audit procedures. Any failure to stabilize our accounting systems
could result in additional material charges and adjustments in the future.
WE MAY ENCOUNTER DIFFICULTIES IN IMPLEMENTING OUR PROPOSED STRATEGIC INITIATIVE
Our ability to successfully implement our proposed strategic initiative
may be affected by the willingness of prospective purchasers to purchase the
assets we identify as divestiture candidates on terms we find acceptable, the
timing and terms on which such assets may be sold, uncertainties relating to
regulatory approvals and other factors affecting the ability of prospective
purchasers to consummate such transactions. The success of our strategic
initiative could also be affected by the availability of financing, and
uncertainties relating to the impact of the proposed strategic initiative on our
credit ratings and, consequently, the availability and cost of debt and equity
financing to us.
WE ARE UNDERGOING CHANGES IN MANAGEMENT
Our business may be affected by our ability to attract and retain
qualified individuals to serve in senior management positions.
WE FACE UNCERTAINTIES RELATING TO PENDING LITIGATION AND INVESTIGATIONS
We face uncertainties relating to pending litigation and
investigations. We are unable to predict the outcome or impact of these matters
and there can be no assurance that they will not have a material adverse effect
on us and our business.
WE FACE POTENTIAL DIFFICULTIES IN CONTINUING TO EXPAND AND MANAGE OUR GROWTH
We have grown rapidly, primarily through acquisitions. We cannot
guarantee that we will be able to continue to expand and successfully manage our
growth. We also cannot guarantee that our existing or acquired operations will
not be adversely affected by the pace of our growth. Improving the productivity
of our acquired operations and using our asset base and strategic position to
operate more efficiently is very important to our financial results and
prospects. In particular, whether we will ultimately achieve the anticipated
benefits of acquired operations will depend on a number of factors, including
our ability to effect:
o administrative costs savings;
o rationalization of collection routes;
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o insurance and bonding cost reductions; and
o general economies of scale.
Moreover, our ability to continue to grow will depend on a number of factors,
including:
o competition from other waste management companies;
o the availability of attractive acquisition opportunities;
o our ability to mitigate antitrust concerns related to
acquisitions in several markets;
o the availability of working capital;
o our ability to maintain margins on existing or acquired
operations; and
o our ability to manage costs in a changing regulatory
environment.
OUR ACQUISITION STRATEGY INVOLVES POTENTIAL RISKS
We regularly pursue opportunities to expand by acquiring additional
waste management businesses and operations that can be effectively integrated
with our existing operations. In addition, we regularly pursue mergers and
acquisition transactions, some of which are significant, in new markets where we
believe that we can successfully become a provider of integrated waste
management services. As one of the leading industry consolidators, we could
announce transactions with either publicly or privately owned businesses at any
time.
Our acquisition strategy involves potential risks. These risks include:
o our failure to accurately assess all of the pre-existing
liabilities of acquired companies;
o unexpected difficulties in successfully integrating the
operations of acquired companies with our existing operations;
o a lack of attractive acquisition opportunities;
o our inability to obtain the capital required to finance
potential acquisitions on satisfactory terms;
o the businesses we acquire not proving profitable; and
o our incurring additional indebtedness or issuing additional
equity securities as a result of future acquisitions.
WE MAY NEED ADDITIONAL CAPITAL IF OUR CASH FLOW IS LESS THAN EXPECTED
We expect to generate sufficient cash flow from our operations in 1999
to cover our anticipated cash needs for capital expenditures and acquisitions.
If our cash flow from operations during 1999 is less than currently expected, or
our capital requirements increase, either due to strategic decisions or
otherwise, we may elect to incur indebtedness or issue equity securities to
cover any additional capital needs.
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However, we cannot guarantee that we will be successful in obtaining additional
capital in this manner on acceptable terms.
We also cannot guarantee that we will be successful in renewing our
existing credit facilities, or that we will be able to renew the credit
facilities on terms acceptable to us. If we are unable to renew our existing
credit facilities, or to obtain other financing sources, our business and
operating results could be affected adversely to a material extent.
FLUCTUATING INTEREST RATES COULD AFFECT US
In the past, we have used variable rate debt under revolving bank
credit arrangements as one method of financing our rapid growth. Although our
recent financings have reduced the amount of variable rate debt as a percentage
of total indebtedness outstanding, issuing variable rate debt will continue to
be an alternative for us. Fluctuations in variable interest rates, which may
occur as general interest rates change, could have a material adverse effect on
us.
INTENSE COMPETITION COULD REDUCE OUR PROFITABILITY
We encounter intense competition from governmental, quasi-governmental
and private sources in all aspects of our operations.
In North America, the waste management services industry consists of
large national companies and local and regional companies of varying sizes and
financial resources. We compete with numerous waste management companies as well
as with counties and municipalities that maintain their own waste collection and
disposal operations. These counties and municipalities may have financial
competitive advantages because tax revenues and tax-exempt financing are
available to them. In addition, competitors may reduce their prices to expand
sales volume or to win competitively bid municipal contracts. Profitability may
decline because of the national emphasis on recycling, composting, and other
waste reduction programs that could reduce the volume of solid waste collected
or deposited in disposal facilities.
Outside of North America, the waste management services industry is
very decentralized and highly fragmented. In some markets, however, we compete
with substantial companies that hold significant market shares, particularly in
Finland, Germany, the Netherlands, Sweden and the United Kingdom. Some of our
international competitors may have greater financial resources and greater
technical resources than we do with respect to specific matters. Especially in
the case of larger contracts, we may be required to commit substantial resources
over a long period of time during the proposal phase without any assurance that
the contract will be awarded to us. Examples include contracts for city-cleaning
services, contracts or bids with respect to the construction or development of
water and wastewater facilities, or permitting and development of a new
treatment facility, waste-to-energy facility, incinerator or landfill.
OUR ACCOUNTING POLICIES CONCERNING UNAMORTIZED CAPITALIZED EXPENDITURES COULD
RESULT IN A MATERIAL CHARGE AGAINST OUR EARNINGS
In accordance with generally accepted accounting principles, we
capitalize certain expenditures and advances relating to acquisitions, pending
acquisitions, and disposal site development and expansion projects. We expense
indirect acquisition costs, such as executive salaries, general corporate
overhead, public affairs and other corporate services, as incurred. Our policy
is to charge against earnings any unamortized capitalized expenditures and
advances relating to any facility or operation that is permanently shut down,
any pending acquisition that is not consummated, and any disposal site
development or
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expansion project that is not completed. The charge against earnings is reduced
by any portion of the capitalized expenditure and advances that we estimate will
be recoverable, through sale or otherwise. In future periods, we may be required
to incur a charge against earnings in accordance with our policy. Depending on
its magnitude, any such charge could have a material adverse effect on our
consolidated financial statements.
GOVERNMENTAL REGULATIONS MAY RESTRICT OUR OPERATIONS OR INCREASE THE LEVEL OF
COSTS OF OUR OPERATIONS
Stringent government regulations at the federal, state and local level
in the United States and in other countries have a substantial impact on our
operations. A large number of complex laws, rules, orders and interpretations
govern environmental protection, health and safety, land use, zoning and related
matters. Among other things, they may restrict our operations and adversely
affect our operating results and financial condition by imposing conditions such
as:
o limitations on the siting and construction of new waste
disposal, transfer or processing facilities or the expansion
of existing facilities;
o limitations or bans on disposal of out-of-state waste or
certain categories of waste; or
o mandates regarding the disposal of solid waste.
Regulations also affect the siting, design and closure of landfills and
could require us to undertake investigatory or remedial activities, curtail
operations or close a landfill temporarily or permanently. Future changes in
these regulations may require us to modify, supplement or replace equipment or
facilities. The costs of complying with these regulations could be substantial.
In order to develop, expand or operate a landfill or other waste
management facility, we must have various facility permits and other
governmental approvals, including those relating to zoning, environmental
protection and land use. These permits and approvals are difficult, time
consuming and costly to obtain, in part because of possible opposition by
governmental officials or citizens. In addition, these permits and approvals may
contain conditions that limit operations and our ability to change the facility
or are otherwise difficult to comply with. We cannot guarantee that we will be
successful in obtaining and maintaining in effect permits and approvals required
for the successful operation and growth of our business, including permits and
approvals for the development of additional disposal capacity needed to replace
existing capacity that is exhausted.
Courts in the United States, basing their decisions on constitutional
law, have ruled that state and local governments may not use regulatory flow
control laws to restrict the free movement of waste in interstate commerce. We
cannot predict what impact, if any, these decisions will have on our disposal
facilities.
WE COULD BE LIABLE FOR ENVIRONMENTAL DAMAGES RESULTING FROM OUR DISPOSAL
FACILITIES AND COLLECTION OPERATIONS
We could be liable if our disposal facilities or collection operations
cause environmental damage to our properties or to nearby landowners,
particularly as a result of the contamination of drinking water sources or soil.
Under current law, we could even be held liable for damage caused by conditions
that existed before we acquired the assets or operations involved. Also, we
could be liable if we arrange for the transportation, disposal or treatment of
hazardous substances that cause environmental contamination, or if a predecessor
owner made such arrangements and under applicable law we are treated as a
successor to the
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prior owner. Any substantial liability for environmental damage could have a
material adverse effect on our operating results and financial condition.
In the ordinary course of our business, we may become involved in a
variety of legal and administrative proceedings relating to land use and
environmental laws and regulations. These may include proceedings in which:
o agencies of federal, state, local or foreign governments seek
to impose liability on us under applicable statutes, sometimes
involving civil or criminal penalties for violations, or to
revoke or deny renewal of a permit we need; and
o citizen groups, adjacent landowners or governmental agencies
oppose the issuance of a permit or approval we need, allege
violations of the permits under which we operate or laws or
regulations to which we are subject, or seek to impose
liability on us for environmental damage for which we may be
responsible.
The adverse outcome of one or more of these proceedings could have a
material adverse effect on our financial position, results of operations or cash
flows.
From time to time we have received citations or notices from
governmental authorities that our operations are not in compliance with our
permits or certain applicable environmental or land use laws and regulations. In
the future we may receive additional citations or notices. We generally seek to
work with the authorities to resolve the issues raised by such citations or
notices. However, we cannot guarantee that we will always be successful in this
regard. Where we are not, we may incur fines, penalties or other sanctions that
could have a material adverse effect on our financial position, results of
operations or cash flows.
Our insurance for environmental liability meets or exceeds statutory
requirements. However, because we believe that the cost for such insurance is
high relative to the coverage it would provide, our coverages are generally
maintained at statutorily required levels. Due to the limited nature of such
insurance coverage for environmental liability, if we were to incur liability
for environmental damage, such liability could have a material adverse effect on
our financial position, results of operations or cash flows.
THE DEVELOPMENT AND ACCEPTANCE OF ALTERNATIVES TO LANDFILL DISPOSAL AND
WASTE-TO-ENERGY FACILITIES COULD REDUCE OUR ABILITY TO OPERATE AT FULL CAPACITY
Our customers are increasingly using alternatives to landfill disposal,
such as recycling and composting. In addition, state and local governments are
increasingly mandating recycling and waste reduction at the source and
prohibiting the disposal of certain types of wastes, such as yard wastes, at
landfills or waste-to-energy facilities. These developments could reduce the
volume of waste going to landfills and waste-to-energy facilities in certain
areas, which may affect our ability to operate our landfills and waste-to-energy
facilities at full capacity as well as the prices that we can charge for
landfill disposal and waste-to-energy services.
FLUCTUATIONS IN THE PRICE OF RECYCLABLE MATERIALS AFFECT OUR OPERATING REVENUES
Recyclable materials that we process for sale, including paper,
plastics, aluminum and other commodities, are subject to significant price
fluctuations. These fluctuations will affect our future operating revenues and
income.
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THE COMMISSION IS INVESTIGATING THE ACCOUNTING PRACTICES OF WASTE MANAGEMENT
HOLDINGS
The Commission has commenced a formal investigation with respect to the
previously filed financial statements (which were subsequently restated) and the
related accounting policies, procedures and system of internal controls of Waste
Management Holdings, Inc., or "WM Holdings," which we acquired through a merger
in July 1998. Several lawsuits and claims have been filed against WM Holdings
and some of its former officers and directors in connection with the restatement
of WM Holdings' financial statements. We are unable to predict the outcome or
impact of the investigation or any previously filed or future lawsuits or claims
arising out of the restatement. However, it is reasonably possible that they
could have a material adverse impact on our financial condition or results of
operations in one or more future periods.
OUR INTERNATIONAL OPERATIONS ENCOUNTER SOCIAL, POLITICAL AND ECONOMIC RISKS
Our operations in foreign countries generally are subject to a number
of risks inherent in any business operating in foreign countries, all of which
are beyond our control. These risks include:
o political, social and economic instability;
o inflation;
o general strikes;
o nationalization of assets;
o currency restrictions and exchange rate fluctuations;
o nullification, modification or renegotiation of contracts; and
o governmental regulation.
We can make no prediction as to how existing or future foreign
governmental regulations in any jurisdiction may affect us in particular or the
waste management industry in general.
OUR BUSINESS IS SEASONAL IN NATURE AND OUR REVENUES AND RESULTS VARY FROM
QUARTER TO QUARTER
Our operating revenues are usually lower in the winter months,
primarily because the volume of waste relating to construction and demolition
activities usually increases in the spring and summer months and the volume of
industrial and residential waste in certain regions where we operate usually
decreases during the winter months. Our first and fourth quarter results of
operations typically reflect this seasonality.
POTENTIAL EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of our Restated Certificate of Incorporation and
Bylaws may make it more difficult for a third party to acquire us in a
transaction that is not approved by our Board of Directors. For example, our
Board of Directors has the power to issue up to 10,000,000 shares of our
preferred stock in one or more series, and to fix the rights and preferences of
any series, without further authorization by the holders of our common stock. In
addition, our Board of Directors is divided into three classes, and each class
serves for a staggered three-year term. This makes it more difficult for a third
party to gain control of our Board of Directors. Generally, these provisions are
designed to permit us to develop our businesses and foster our long-term growth
without the disruption caused by the threat of a takeover that our Board of
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Directors does not think is in our best interests or in the best interests of
our stockholders. Also, these provisions may discourage a third party from
making a tender offer or otherwise attempting to gain control of us even though
the attempt might be beneficial economically to us and our stockholders.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In the normal course of our business, we, in an effort to help keep our
stockholders and the public informed about our operations, may from time to time
issue or make certain statements, either in writing or orally, that are or
contain "forward-looking statements," as that term is defined in the U.S.
federal securities laws. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies, projected or anticipated benefits from acquisitions made by
or to be made by us, or projections involving anticipated revenues, earnings, or
other aspects of operating results. Certain statements contained in this
prospectus or in the accompanying prospectus supplement and in the reports and
filings with the Commission that we incorporated by reference may be
forward-looking statements. The words "may," "expect," "believe," "anticipate,"
"project," "estimate," their opposites and similar expressions are intended to
identify forward-looking statements. We caution readers that such statements are
not guarantees of future performance or events and are subject to a number of
factors that may tend to influence the accuracy of the statements and the
projections upon which the statements are based, including, but not limited to,
those discussed above under "Risk Factors." All phases of our operations are
subject to a number of uncertainties, risks and other influences, many of which
are outside our control, and any one of which, or a combination of which, could
materially affect our consolidated financial statements and operations and
whether forward-looking statements made by us ultimately prove to be accurate.
These factors are discussed more completely in our filings with the
Commission, including our annual report on Form 10-K for the year ended December
31, 1998, and our quarterly reports on Form 10-Q for the quarters ended March
31, 1999, June 30, 1999 and September 30, 1999, which are incorporated by
reference into this prospectus.
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<PAGE> 16
USE OF PROCEEDS
Except as otherwise described in any prospectus supplement, we will use
the net proceeds from the sale of our debt securities or common stock for
general corporate purposes. We will determine any specific allocation of the net
proceeds of an offering to a specific purpose at the time of such offering and
will describe the specific allocation in the related prospectus supplement.
We may also issue shares of our common stock to settle litigation and
other claims or to satisfy judgments or arbitration awards. We will not receive
any cash proceeds from these issuances but will eliminate an actual or potential
liability.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to
fixed charges for the periods as shown:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
1994 1995 1996 1997 1998 SEPTEMBER 30, 1999
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Actual 2.7x 2.6x 2.1x N/A(1) N/A(2) N/A(3)
</TABLE>
(1) Earnings were insufficient to cover fixed charges in 1997. Additional
earnings of $660.4 million were necessary to cover fixed charges for this
period. The earnings available for fixed charges were negatively impacted
by merger costs of $112.7 million (primarily related to our merger with
United Waste Systems, Inc. in August 1997), and asset impairments and
unusual items of $1.8 billion. The asset impairments and unusual items
primarily related to a comprehensive review performed by Waste Management
Holdings of its operating assets and investments.
(2) Earnings were insufficient to fund fixed charges in 1998. Additional
earnings of $720.4 million were necessary to cover fixed charges for this
period. The earnings available for fixed charges were negatively impacted
by merger costs of $1.8 billion and asset impairments and unusual items of
$864.1 million related primarily to the mergers between Waste Management,
Inc. and Waste Management Holdings in July 1998, and Waste Management, Inc.
and Eastern Environmental Services, Inc. in December 1998.
(3) Earnings were insufficient to fund fixed charges for the nine months ended
September 30, 1999. Additional earnings of $155.0 million were necessary to
cover fixed charges for this period. The earnings available for fixed
charges were negatively impacted by merger costs of $111.3 million related
to the merger between Waste Management, Inc. and Waste Management Holdings,
Inc. in July 1998 and $700.0 million related to the comprehensive review we
performed of our operating assets and investments.
We computed our consolidated ratios of earnings to fixed charges by
dividing earnings available for fixed charges by fixed charges. For this
purpose, earnings available for fixed charges are the sum of income available
for fixed charges before income taxes, undistributed earnings from affiliated
companies' minority interests, cumulative effect of accounting changes, and
fixed charges, excluding capitalized interest. Fixed charges are interest,
whether expensed or capitalized, amortization of debt expense and discount on
premium relating to indebtedness, and such portion of rental expense that can be
demonstrated to be representative of the interest factor in the particular case.
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<PAGE> 17
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either our senior debt, or "Senior
Debt Securities," or our subordinated debt, or "Subordinated Debt Securities."
Debt Securities may be issued from time to time under one or more indentures,
each dated as of a date on or prior to the issuance of the Debt Securities to
which it relates. Senior Debt Securities and Subordinated Debt Securities may be
issued pursuant to separate indentures, respectively, a "Senior Debt Indenture"
and a "Subordinated Debt Indenture," in each case between us and Texas Commerce
Bank National Association, now known as Chase Bank of Texas, National
Association, or "Chase Bank," and in the form filed as an exhibit to the
Registration Statement of which this prospectus is a part, subject to such
amendments or supplements as may be adopted from time to time.
We have previously entered into a Senior Indenture dated as of
September 10, 1997 with Chase Bank in the form filed as an exhibit to our
Current Report on Form 8-K (file no. 1-12154) filed with the Commission on
September 24, 1997. We have previously entered into a Subordinated Indenture
dated as of February 1, 1997 with Chase Bank in the form filed as an exhibit to
our Current Report on Form 8-K (file no. 1-12154) filed with the Commission on
February 7, 1997. The Senior Debt Indenture and the Subordinated Debt Indenture,
as amended or supplemented from time to time, are sometimes hereinafter referred
to individually as an "Indenture" and collectively as the "Indentures." Chase
Bank (and any successors thereto as trustees under the respective Indentures) is
hereafter referred to as the "Trustee." The following summaries of actual or
anticipated provisions of the Indentures and the Debt Securities do not purport
to be complete and such summaries are subject to the detailed provisions of the
applicable Indenture to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein. Section
references in parentheses below are to sections in both Indentures unless
otherwise indicated. Wherever particular sections or defined terms of the
applicable Indenture are referred to, such sections or defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference. The Indentures are
substantially identical, except for certain of our covenants and provisions
relating to subordination and conversion.
The Debt Securities may be issued from time to time in one or more
series. The following description of the Debt Securities sets forth certain
general terms and provisions of the Debt Securities of all series. The
particular terms of each series of Debt Securities offered by any prospectus
supplement will be described therein.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
General. The Debt Securities will be our unsecured senior or
subordinated obligations and may be issued from time to time in one or more
series. The Indentures do not limit the amount of Debt Securities, debentures,
notes or other types of indebtedness that we may issue or that any of our
subsidiaries may issue. The Indentures do not, other than as may be set forth in
any prospectus supplement, restrict transactions between us and our affiliates
or the payment of dividends or other distributions by us to our stockholders.
The rights of our creditors, including holders of Debt Securities, will be
limited to our assets and will not be an obligation of any of our Subsidiaries.
In addition, other than as may be set forth in any prospectus supplement, the
Indentures do not and the Debt Securities will not contain any covenants or
other provisions that are intended to afford holders of the Debt Securities
special protection in the event we experience either a change of control or a
highly leveraged transaction.
Reference is made to the prospectus supplement for the following terms
of and information relating to the Debt Securities (to the extent such terms are
applicable to such Debt Securities):
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<PAGE> 18
o the title of the Debt Securities;
o classification as either Senior Debt Securities or Subordinated
Debt Securities;
o whether the Debt Securities that constitute Subordinated Debt
Securities are convertible into common stock and, if so, the
terms and conditions upon which such conversion will be
effected, including the initial conversion price or conversion
rate and any adjustments thereto in addition to or different
from those described herein, the conversion period and other
conversion provisions in addition to or in lieu of those
described herein;
o any limit on the aggregate principal amount of the Debt
Securities;
o whether the Debt Securities are to be issuable as Registered
Securities or Bearer Securities or both, whether any of the
Debt Securities are to be issuable initially in temporary
global form and whether any of the Debt Securities are to be
in permanent global form;
o the price or prices (expressed as a percentage of the
aggregate principal amount thereof) at which the Debt
Securities will be issued;
o the date or dates on which the Debt Securities will mature;
o the rate or rates per annum (or the method by which such will
be determined) at which the Debt Securities will bear
interest, if any, and the date from which any such interest
will accrue;
o the Interest Payment Dates on which any such interest on the
Debt Securities will be payable, the date on which payment of
such interest, if any, will commence and the Regular Record
Dates for any interest payable on any Debt Securities which
are Registered Securities on any Interest Payment Date and the
extent to which, or the manner in which, any interest payable
on a temporary global Debt Security on an Interest Payment
Date will be paid;
o any mandatory or optional sinking fund or analogous provisions;
o each office or agency where, subject to the terms of the
Indentures as described below under "Payment and Paying
Agents," the principal of and any premium and interest on the
Debt Securities will be payable and each office or agency
where, subject to the terms of the Indentures as described
below under "Form, Exchange, Registration and Transfer," the
Debt Securities may be presented for registration of transfer
or exchange;
o our right, if any, or our obligation, if any, to redeem the
Debt Securities and the period or periods, if any, within
which and the price or prices at which the Debt Securities
may, pursuant to any optional or mandatory redemption
provisions, be redeemed, in whole or in part, and the other
detailed terms and provisions of any such optional or
mandatory redemption;
o the denominations in which any Debt Securities which are
Registered Securities will be issuable, if other than
denominations of $1,000 and any integral multiple thereof, and
the denomination or denominations in which any Debt Securities
which are Bearer Securities will be issuable, if other than
the denomination of $5,000;
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<PAGE> 19
o the currency or currencies (including composite currencies) in
which payment of principal of and any premium and interest on
the Debt Securities is payable if other than United States
dollars;
o any index used to determine the amount of payments of principal
of and any premium and interest on the Debt Securities;
o information with respect to book-entry procedures, if any;
o any deletions from, modification of or additions to the Events
of Default or our covenants with respect to such Debt
Securities; and
o any other terms of the Debt Securities not inconsistent with
the provisions of the Indentures. (Section 301) Any prospectus
supplement will also describe any special provisions for the
payment of additional amounts with respect to the Debt
Securities.
Debt Securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a Debt Security, including any zero-coupon
security, which is issued at a price lower than the amount payable upon the
Stated Maturity thereof and which provides that upon redemption or acceleration
of the maturity thereof an amount less than the amount payable upon the Stated
Maturity thereof and determined in accordance with the terms of such Debt
Security shall become due and payable. We will set forth any special United
States federal income tax considerations applicable to Debt Securities issued at
an original issue discount, including Original Issue Discount Securities, and
special United States tax considerations and other terms and restrictions
applicable to any Debt Securities which are issued in bearer form, offered
exclusively to United States Aliens or denominated in other than United States
dollars, in a prospectus supplement.
Form, Exchange, Registration and Transfer. Debt Securities of a series
may be issuable in definitive form solely as Registered Securities, solely as
Bearer Securities or as both Registered Securities and Bearer Securities. Unless
otherwise indicated in an applicable prospectus supplement, Bearer Securities
will have interest coupons attached. The Indentures also provide that Debt
Securities of a series may be issuable in temporary or permanent global form.
(Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities of
any series are issuable as both Registered Securities and Bearer Securities, at
the option of the Holder, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Bearer Securities surrendered in exchange
for Registered Securities between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest, and interest accrued as of
such date for payment of interest will not be payable in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance with the terms
of the applicable Indenture. Bearer Securities will not be issued in exchange
for Registered Securities. (Section 305)
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by us for such
purpose with respect to any series of Debt Securities and referred to in an
applicable prospectus supplement, without
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<PAGE> 20
service charge and upon payment of any taxes and other governmental charges as
described in the Indentures. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request.
Unless otherwise indicated in any prospectus supplement, the Trustee for the
series of Debt Securities will serve as Security Registrar. (Section 305) If a
prospectus supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by us with respect to any series of Debt
Securities, we may at any time rescind the designation of any such transfer
agent or approve a change in the location through which any such transfer agent
acts, except that, if Debt Securities of a series are issuable solely as
Registered Securities, we will be required to maintain a transfer agent in each
Place of Payment for such series and, if Debt Securities of a series are also
issuable as Bearer Securities, we will be required to maintain (in addition to
the Security Registrar) a transfer agent in a Place of Payment for such series
located outside the United States. We may at any time designate additional
transfer agents with respect to any series of Debt Securities. (Section 1002)
Title to any Bearer Securities (including Bearer Securities in
permanent global form) and any coupons appertaining thereto will pass by
delivery. We, the Trustee, our agents and the agents of the Trustee may treat
the bearer of any Bearer Security and the bearer of any coupon and the
registered holder of any Registered Security as the owner thereof (whether or
not such Debt Security or coupon shall be overdue and notwithstanding any notice
to the contrary) for the purpose of making payment and for all other purposes.
(Section 308)
In the event of any redemption in part, we shall not be required to:
o issue, register the transfer of or exchange Debt Securities of
any series during a period beginning at the opening of
business 15 days prior to the selection of Debt Securities of
that series for redemption and ending on the close of business
on:
o if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant
notice of redemption; and
o if Debt Securities of the series are issuable as Bearer
Securities, the date of the first publication of the relevant
notice of redemption or, if Securities of the series are also
issuable as Registered Securities and there is no publication,
the mailing of the relevant notice of redemption;
o register the transfer of or exchange any Registered Security,
or portion thereof, called for redemption, except the
unredeemed portion of any Registered Security being redeemed
in part; or
o exchange any Bearer Security called for redemption, except to
exchange such Bearer Security for a Registered Security of
that series and like tenor which is immediately surrendered
for redemption. (Section 305)
Replacement of Securities and Coupons. We will replace any mutilated
Debt Security or any Debt Security with a mutilated coupon at the expense of the
Holder upon surrender of the Debt Security to the Trustee. We will replace Debt
Securities or coupons that become destroyed, stolen or lost at the expense of
the Holder upon delivery to the Trustee of the Debt Security and coupons or
evidence of destruction, loss or theft thereof satisfactory to us and the
Trustee; in the case of any coupon which becomes destroyed, stolen or lost, such
coupon will be replaced by issuance of a new Debt Security in exchange for the
Debt Security to which such coupon appertains. In the case of a destroyed, lost
or stolen Debt Security or
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<PAGE> 21
coupon, an indemnity satisfactory to the Trustee and to us may be required at
the expense of the Holder of such Debt Security or coupon before a replacement
Debt Security will be issued. (Section 306)
Payment and Paying Agents. Unless otherwise indicated in an applicable
prospectus supplement, payment of principal of and any premium and interest on
Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agents outside the United States as
we may designate from time to time, in the manner indicated in such prospectus
supplement. (Section 1002) Unless otherwise indicated in an applicable
prospectus supplement, payment of interest on Bearer Securities on any Interest
Payment Date will be made only against surrender to the Paying Agent of the
coupon relating to such Interest Payment Date. (Section 1001) No payment with
respect to any Bearer Security will be made at any of our offices or agencies in
the United States or by check mailed to any address in the United States or by
transfer to any account maintained with a bank located in the United States.
Notwithstanding the foregoing, payments of principal of and any premium and
interest on Bearer Securities denominated and payable in U.S. dollars will be
made at the office of our Paying Agent in the Borough of Manhattan, the City of
New York, if (but only if) payment of the full amount thereof in U.S. dollars at
all offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions. (Section 1002)
Unless otherwise indicated in an applicable prospectus supplement,
payment of principal of and any premium and interest on Registered Securities
will be made at the office of the Paying Agent or Paying Agents as we may
designate from time to time, except that at our option, payment of any interest
may be made by check mailed on or before the due date to the address of the
Person entitled thereto as such address shall appear in the Security Register.
(Rule 307, 1002) Unless otherwise indicated in an applicable prospectus
supplement, payment of any installment of interest on Registered Securities will
be made to the Person in whose name such Registered Security is registered at
the close of business on the Regular Record Date for such interest.
(Section 307)
Unless otherwise indicated in an applicable prospectus supplement, the
Trustee for the series of Debt Securities will act as our Paying Agent for
payments with respect to Debt Securities which are issuable solely as Registered
Securities and we will maintain a Paying Agent outside the United States for
payments with respect to Debt Securities (subject to limitations described above
in the case of Bearer Securities) which are issuable solely as Bearer Securities
or as both Registered Securities and Bearer Securities. Any Paying Agents
outside the United States and any other Paying Agents in the United States that
we initially designate for the Debt Securities will be named in an applicable
prospectus supplement. We may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issuable solely as Registered Securities, we will be required to maintain a
Paying Agent in each Place of Payment for such series and, if Debt Securities of
a series are issuable as Bearer Securities, we will be required to maintain (i)
a Paying Agent in the Borough of Manhattan, The City of New York for principal
payments with respect to any Registered Securities of the series (and for
payments with respect to Bearer Securities of the series in the circumstances
described above, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Debt Securities of such series
and any coupons appertaining thereto may be presented and surrendered for
payment. (Section 1002)
All moneys paid by us to a Paying Agent for the payment of principal of
and any premium or interest on any Debt Security which remain unclaimed at the
end of two years after such principal, premium or interest shall have become due
and payable will (subject to applicable escheat laws) be repaid to us, and the
Holder of such Debt Security or any coupon will thereafter look only to us for
payment thereof. (Section 1003)
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Global Debt Securities. Debt Securities of a series may be issued in
whole or in part in the form of one or more global Debt Securities that will be
deposited with, or on behalf of, a depository identified in the prospectus
supplement relating to such series. Global Debt Securities may be issued only in
fully registered form and in either temporary or permanent form. (Section 203)
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a global Debt Security may not be transferred
except as a whole by the depository for such global Debt Security to a nominee
of such depository or by a nominee of such depository to such depository or
another nominee of such depository or by the depository or any nominee to a
successor depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a
series of Debt Securities in the form of one or more global Debt Securities will
be described in the prospectus supplement relating to that series.
Satisfaction and Discharge of Indenture. Each Indenture provides that
we may discharge the Indenture (except as to any surviving rights of
registration of transfer or exchange of Debt Securities and any right to receive
additional amounts) with respect to all Debt Securities issued under the
Indenture, which Debt Securities have not already been delivered to the Trustee
for cancellation and which either have become due and payable or are by their
terms due and payable within one year (or are to be called for redemption within
one year) by depositing with the Trustee as trust funds an amount sufficient to
pay when due the principal of and premium, if any, and interest, if any, on all
outstanding Debt Securities when due. (Section 401)
Defeasance and Discharge. Each Indenture provides that, if we so elect
by Board Resolution with respect to the Debt Securities of any series issued
under such Indenture (other than convertible Subordinated Debt Securities), we
will be discharged from any and all obligations in respect of the Debt
Securities of such series (except for certain obligations relating to temporary
Debt Securities and exchange of Debt Securities, registration of transfer or
exchange of Debt Securities of such series, replacement of stolen, lost or
mutilated Debt Securities of such series, maintenance of paying agencies to hold
moneys for payment in trust and payment of additional amounts, if any, required
in consequence of United States withholding taxes imposed on payments to
non-United States persons) upon the deposit with the Trustee, in trust, of money
and/or U.S. Government Obligations which through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of (and premium, if any), and each
installment of interest on, the Debt Securities of such series on the Stated
Maturity of such payments in accordance with the terms of such Indenture and the
Debt Securities of such series. (Sections 1302, 1304) Such a trust may only be
established if, among other things, we have delivered to the Trustee an Opinion
of Counsel to the effect that (i) we have received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the date of
such Indenture there has been a change in applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of such series will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge, and will be subject to federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred. (Section 1304) In the event
of any such defeasance and discharge of Debt Securities of such series, Holders
of such series would be entitled to look only to such trust fund for payment of
principal of and any premium and any interest on their Debt Securities until
Maturity.
Covenant Defeasance. Each Indenture also provides that, if we so elect
by Board Resolution with respect to the Debt Securities of any series issued
thereunder, we may omit to comply with certain restrictive covenants, including
(in the case of the Senior Debt Indenture) the covenants described under
"--Provisions Applicable Solely to Senior Debt Securities--Limitation on Liens"
and "--Limitations on Sale and Leaseback Transactions," but excluding (in the
case of the Subordinated Debt Indenture) any of
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<PAGE> 23
our applicable obligations respecting the conversion of Debt Securities of such
series into common stock, and any such omission shall not be an Event of Default
with respect to the Debt Securities of such series, upon the deposit with the
Trustee, in trust, of money and/or U.S. Government Obligations which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide money in an amount sufficient to pay the principal of (and
premium, if any), and each installment of interest on, the Debt Securities of
such series on the Stated Maturity of such payments in accordance with the terms
of such Indenture and the Debt Securities of such series. Our obligations under
such Indenture and the Debt Securities of such series other than with respect to
such covenants shall remain in full force and effect. (Section 1303) Such a
trust may be established only if, among other things, we have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance of certain obligations and will be subject to
federal income tax on the same amounts and in the same manner and at the same
time as would have been the case if such deposit and defeasance had not
occurred. (Section 1304)
Although the amount of money and U.S. Government Obligations on deposit
with the Trustee would be intended to be sufficient to pay amounts due on the
Debt Securities of such series at the time of their Stated Maturity, in the
event we exercise our option to omit compliance with the covenants defeased with
respect to the Debt Securities of any series as described above, and the Debt
Securities of such series are declared due and payable because of the occurrence
of any Event of Default, such amount may not be sufficient to pay amounts due on
the Debt Securities of such series at the time of the acceleration resulting
from such Event of Default. We shall in any event remain liable for such
payments as provided in the applicable Indenture.
Federal Income Tax Consequences. Under current United States federal
income tax law, defeasance and discharge would likely be treated as a taxable
exchange of Debt Securities to be defeased for an interest in the defeasance
trust. As a consequence, a holder would recognize gain or loss equal to the
difference between the holder's cost or other tax basis for such Debt Securities
and the value of the holder's interest in the defeasance trust, and thereafter
would be required to include in income the holder's share of the income, gain or
loss of the defeasance trust. Under current United States federal income tax
law, covenant defeasance would ordinarily not be treated as a taxable exchange
of such Debt Securities.
Meetings, Modification and Waiver. We and the Trustee may modify and
amend either Indenture with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of each series affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the Holder of each Outstanding Security
affected thereby:
(a) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Debt Security;
(b) change the Redemption Date with respect to any Debt Security;
(c) reduce the principal amount of, or premium or interest on, any Debt
Security;
(d) change our obligation, if any, to pay additional amounts;
(e) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof;
(f) change the coin or currency in which any Debt Security or any
premium or interest thereon is payable;
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(g) change the redemption right of any Holder;
(h) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security or any conversion right
with respect thereto;
(i) reduce the percentage in principal amount of Outstanding Securities
of any series, the consent of whose Holders is required for
modification or amendment of such Indenture or for waiver of compliance
with certain provisions of such Indenture or for waiver of certain
defaults;
(j) reduce the requirements contained in such Indenture for quorum or
voting;
(k) change our obligation, if any, to maintain an office or agency in
the places and for the purposes required by such Indenture;
(l) adversely affect the right to convert Subordinated Debt Securities,
if applicable; or
(m) modify any of the above provisions. (Section 902)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Subordinated Debt Securities without the
consent of each holder of Senior Indebtedness (as defined below under
"--Provisions Applicable Solely to Subordinated Debt Securities") then
outstanding that would be adversely affected thereby. (Section 907 of the
Subordinated Debt Indenture)
The Holders of a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of that
series, waive, insofar as that series is concerned, our compliance with certain
restrictive provisions of the Indenture under which such series has been issued.
(Section 1007 of the Senior Debt Indenture; Section 1008 of the Subordinated
Debt Indenture) The Holders of a majority in aggregate principal amount of the
Outstanding Securities, of each series may, on behalf of all Holders of that
series, waive any past default under the applicable Indenture with respect to
any Debt Securities of that series, except a default (a) in the payment of
principal of, or premium, if any, or any interest on any Debt Security of such
series or (b) in respect of a covenant or provision of such Indenture which
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected. (Section 513)
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders for quorum purposes, (i) the principal
amount of an Original Issue Discount Security that is deemed to be Outstanding
will be the amount of the principal that would be due and payable as of the date
of such determination upon acceleration of the Maturity thereof, and (ii) the
principal amount of a Debt Security denominated in a foreign currency or
currency units will be the U.S. dollar equivalent, determined on the date of
original issuance of such Debt Security, of the principal amount of such Debt
Security or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent, determined on the date of original issuance of such Security, of the
amount determined as provided in (i) above. (Section 101)
Each Indenture contains provisions for convening meetings of the
Holders of a series if Debt Securities of that series are issuable as Bearer
Securities. (Section 1401) A meeting may be called at any time by the Trustee,
and also, upon request, by us or the Holders of at least 10% in aggregate
principal amount of the Outstanding Securities of such series, in any such case
upon notice given in accordance with "Notices" below. (Section 1402) Except for
any consent which must be given by the Holder of each Outstanding Security
affected thereby, as described above, any resolution presented at a meeting (or
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adjourned meeting at which a quorum is present) may be adopted by the
affirmative vote of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in aggregate
principal amount of the Outstanding Securities of a series may be adopted at a
meeting (or adjourned meeting duly reconvened at which a quorum is present) by
the affirmative vote of the Holders of such specified percentage in aggregate
principal amount of the Outstanding Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of any series duly held in
accordance with the applicable Indenture will be binding on all Holders of that
series and related coupons. The quorum at any meeting, and at an reconvened
meeting, will be Persons holding or representing a majority in aggregate
principal amount of the Outstanding Securities of a series.
(Section 1404)
Notices. Except as otherwise provided in an applicable prospectus
supplement, notices to Holders of Bearer Securities will be given by publication
at least twice in a daily newspaper in the City of New York and in such other
city or cities as may be specified in such Bearer Securities. Notices to Holders
of Registered Securities will be given by first-class mail to the addresses of
such Holders as they appear in the Security Register. (Section 106)
Governing Law. The Indentures, the Debt Securities and coupons will be
governed by, and construed in accordance with, the laws of the State of New
York. (Section 113)
Regarding the Trustee. The Trustee appointed and serving as trustee
pursuant to each of the Senior Debt Indenture and the Subordinated Debt
Indenture is Chase Bank.
Each Indenture contains certain limitations on the right of the
Trustee, should it become our creditor, to obtain payment of claims in certain
cases, or to realize for its own account on certain property received in respect
of any such claim as security or otherwise. (Section 613) The Trustee is
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest (as described in the Indentures), it must eliminate such
conflict or resign. (Section 608)
The holders of a majority in principal amount of all outstanding Debt
Securities of a series (or if more than one series is affected thereby, all
series so affected, voting as a single class) will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy or
power available to the Trustee for such series or all such series so affected.
In case an Event of Default shall occur (and shall not be cured) under
any Indenture relating to a series of Debt Securities and is known to the
Trustee for such series, such Trustee shall exercise such of the rights and
powers vested in it by such Indenture and use the same degree of care and skill
in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs. Subject to such provisions, no
Trustee will be under any obligation to exercise any of its rights or powers
under the applicable Indenture at the request of any of the holders of Debt
Securities unless they shall have offered to such Trustee security and indemnity
satisfactory to it.
Pursuant to the Trust Indenture Act, a trustee under an indenture may
be deemed to have a conflicting interest, and may, under certain circumstances
set forth in the Trust Indenture Act, be required to resign as trustee under
such indenture, if the securities under such indenture are in default (as such
term is defined in such indenture) and the trustee is the trustee under another
indenture under which any other securities of the same obligor are outstanding,
subject to certain exceptions set forth in the Trust Indenture Act. In such
event, the obligor must take prompt steps to have a successor trustee appointed
in the manner provided in the indenture from which the trustee has resigned.
Accordingly, Chase Bank, as trustee under the Senior Debt Indenture and the
Subordinated Debt Indenture, could be required to resign as trustee
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under one of such Indentures should a default occur under one of such
Indentures. In such event, we would be required to take prompt steps to have a
successor trustee or successor trustees appointed in the manner provided in the
applicable Indenture.
Chase Bank, as the trustee under the Senior Debt Indenture and the
Subordinated Debt Indenture, may be a depositary for funds of, may make loans to
and may perform other routine banking services for us and certain of our
affiliates in the normal course of business.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
General. Senior Debt Securities will be issued under the Senior Debt
Indenture, and each series will rank pari passu as to the right of payment of
principal and any premium and interest with each other series issued thereunder
and will rank senior to all series of Subordinated Debt Securities issued and
outstanding and that may be issued from time to time.
Certain Definitions. For purposes of the following discussion, the
following definitions are applicable (Section 1008 and 1009 of the Senior Debt
Indenture).
"Attributable Debt" shall mean, as of any particular time, the present
value, discounted at a rate per annum equal to (i) the implied lease rate of or
(ii) if the implied lease rate is not known to us, then the weighted average
interest rate of all Senior Debt Securities outstanding at the time under the
Senior Debt Indenture compounded semi-annually, in either case, of the
obligation of a lessee for rental payments during the remaining term of any
lease (including any period for which such lease has been extended or may, at
the option of the lessor, be extended); the net amount of rent required to be
paid for any such period shall be the total amount of the rent payable by the
lessee with respect to such period, but may exclude amounts required to be paid
on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges; and, in the case of any lease which is terminable by
the lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Consolidated Net Tangible Assets" shall mean, at any date of
determination, the total amount of our assets after deducting therefrom: (i) all
the current liabilities (excluding (a) any current liabilities that by their
terms are extendible or renewable at the option of the obligor thereon to a time
more than 12 months after the time as of which the amount thereof is being
computed, and (b) current maturities of long term debt) and (ii) the value (net
of any applicable reserves) of all intangible assets such as excess of cost over
net assets of acquired businesses, customer lists, covenants not to compete,
licenses, and permits, all as set forth on our and our consolidated
subsidiaries' consolidated balance sheet for our most recently completed fiscal
quarter, prepared in accordance with United States generally accepted accounting
principles.
"Guaranty" shall mean any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the debt, obligation or
other liability of any other Person (other than by endorsements of instruments
in the course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of the obligor's
obligation under any Guaranty shall (subject to any limitation set forth
therein) be deemed to be the amount of such other Person's debt, obligation or
other liability or the amount of such dividends or other distributions
guaranteed.
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"Indebtedness" of any Person shall mean
(a) all obligations of such Person for borrowed money (including,
without limitation, all notes payable and drafts accepted representing
extension of credit and all obligations evidenced by bonds, debentures,
notes or other similar instruments) or on which interest charges are
customarily paid, all as shown on a balance sheet of such Person as of
the date at which Indebtedness is to be determined;
(b) all other items which, in accordance with generally accepted
accounting principles, would be included as liabilities on the
liability side of a balance sheet of such Person as of the date at
which Indebtedness is to be determined; and
(c) or not so included as liabilities in accordance with generally
accepted accounting principles,
(i) all indebtedness (excluding, however, prepaid interest
thereon) secured by a Security Interest in property owned or being
purchased by such Person (including, without limitation, indebtedness
arising under conditional sales or other title retention agreements)
whether or not such indebtedness shall have been assumed by such
Person, and
(ii) all Guaranties of such Person.
"Principal Property" shall mean any waste processing, waste disposal or
resource recovery plant or similar facility located within the United States
(other than its territories and possessions and Puerto Rico) or Canada and owned
by, or leased to, us or any Restricted Subsidiary, except (a) any such plant or
facility (i) owned or leased jointly or in common with one or more persons other
than us and any Restricted Subsidiaries in which our and our Restricted
Subsidiaries' interest does not exceed 50%, or (ii) which the Board of Directors
determines in good faith is not of material importance to our and our
subsidiaries', as an entity, total business conducted, or assets owned, or (b)
any portion of such plant or facility which the Board of Directors determines in
good faith not to be of material importance to the use or operation thereof.
"Restricted Subsidiary" shall mean any Subsidiary (other than any
Subsidiary of which we own directly or indirectly less than all of the
outstanding Voting Stock) (a) principally engaged in, or whose principal assets
consist of property used by us or any Restricted Subsidiary in, the storage,
collection, transfer, interim processing or disposal of waste within the United
States or Canada, or (b) which we shall designate as a Restricted Subsidiary in
an Officers' Certificate delivered to the Trustee.
"Security Instrument" shall mean any security agreement, chattel
mortgage, assignment, financing or similar statement or notice, continuation
statement, other agreement or instrument, or amendment or supplement to any
thereof, providing for, evidencing or perfecting any Security Interest or lien.
"Security Interest" shall mean any interest in any real or personal
property or fixture which secures payment or performance of an obligation and
shall include any mortgage, lien, encumbrance, charge or other security interest
of any kind, whether arising under a Security Instrument or as a matter of law,
judicial process or otherwise.
Consolidation, Merger, Sale. The Senior Debt Indenture provides that we
may not consolidate with or merge into any other Person or convey, transfer or
lease our properties and assets substantially as an entirety to any Person,
unless (1) the Person formed by such consolidation or into which we are merged
or the Person which acquires by conveyance or transfer, or which leases, our
properties and assets we are
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substantially as an entirety shall be a corporation, partnership or trust which
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of and any premium and interest (including all additional
amounts, if any, payable pursuant to the Senior Debt Indenture) on all the
Senior Debt Securities and the performance or observance of every other covenant
of the Senior Debt Indenture to be performed or observed on our part; and (2)
immediately after giving effect to such transaction and treating any
indebtedness which becomes our or our Subsidiary's obligation as a result of
such transaction as having been incurred by us or our Subsidiary at the time of
such transaction, no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have happened and be
continuing. Upon any consolidation of us with, or merger of us into, any other
Person or any, conveyance, transfer or lease of our properties and assets
substantially as an entirety, the successor Person formed by such consolidation
or into which we are merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise our every right
and power under the Senior Debt Indenture with the same effect as if such
successor Person had been named as us herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under the Senior Debt Indenture and the Senior Debt Securities and
coupons and may liquidate and dissolve. (Sections 801, 802 of the Senior Debt
Indenture)
Limitation on Liens. Unless provided otherwise in the applicable
prospectus supplement, the provisions of this covenant shall apply to each
series of Senior Debt Securities issued under the Senior Debt Indenture:
(a) We will not, and we will not permit any of our Restricted
Subsidiaries to, create, incur, assume or suffer to exist, directly
or indirectly, any Indebtedness secured by a Security Interest upon
any Principal Property of us or of a Restricted Subsidiary, whether
owned as of the date of this Indenture or hereafter acquired,
without making effective provision (and we hereby covenant that in
any such case we shall make or cause to be made effective
provision) whereby the Senior Debt Securities of that series then
outstanding and any other Indebtedness of us or any Restricted
Subsidiary then entitled thereto shall be secured by such Security
Interest equally and ratably with (or, in the case of the Senior
Debt Securities of that series and if we shall so determine, prior
to) any and all other Indebtedness of us or any Restricted
Subsidiary thereby secured for so long as any such other
Indebtedness of us or any Restricted Subsidiary shall be so
secured; provided, that nothing in the Senior Debt Indenture shall
prevent, restrict or apply to Indebtedness secured by:
(1) (a) Any Security Interest upon property or assets which is
created prior to or contemporaneously with, or within 360 days
after, (i) in the case of the acquisition of such property or
assets, the completion of such acquisition and (ii) in the case of
the construction, development or improvement of such property or
assets, the later to occur of the completion of such construction,
development or improvement or the commencement of operation or use
of the property or assets, which Security Interest secures or
provides for the payment, financing or refinancing, directly or
indirectly, of all or any part of the acquisition cost of such
property or assets or the cost of construction, development or
improvement thereof; or (b) any Security Interest upon property or
assets existing at the time of the acquisition thereof, which
Security Interest secures obligations assumed by us or any
Restricted Subsidiary; or (c) any conditional sales agreement or
other title retention agreement with respect to any property or
assets acquired by us or any Restricted Subsidiary, or (d) any
Security Interest existing on the property or assets or shares of
stock of a corporation or firm at the time such corporation or firm
is merged into or consolidated with us or any Restricted Subsidiary
or at the time of a sale, lease or other disposition of the
property or assets of such corporation or firm as an entirety or
substantially as an entirety to us or any Restricted Subsidiary or
at the time such corporation becomes a Restricted Subsidiary; or
(e) any Security Interest existing on the property, assets or
shares of stock of any successor which
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shall have become us in accordance with the provisions of the
covenant described in "--Provisions Applicable Solely to Senior
Debt Securities--Consolidation, Merger and Sale of Assets";
provided, in each case, that any such Security Interest described
in the foregoing clauses (b), (c), (d) or (e) does not attach to or
affect property or assets owned by us or any Restricted Subsidiary
prior to the event referred to in such clauses; or
(2) Mechanics', materialmen's, carriers' or other like liens
arising in the ordinary course of business (including construction
of facilities) in respect of obligations which are not due or which
are being contested in good faith; or
(3) Any Security Interest arising by reason of deposits with,
or the giving of any form of security to, any governmental agency
or any body created or approved by law or governmental regulation,
which is required by law or governmental regulation as a condition
to the transaction of any business or the exercise of any
privilege, franchise or license (including, without limitation, any
Security Interest arising by reason of one or more letters of
credit in connection with any international waste management
contract to be performed by us or any of our Subsidiaries or our or
their respective affiliates); or
(4) Security Interests for taxes, assessments or governmental
charges or levies not yet delinquent or Security Interests for
taxes, assessments or governmental charges or levies already
delinquent but the validity of which is being contested in good
faith; or
(5) Security Interests (including judgment liens) arising in
connection with legal proceedings so long as such proceedings are
being contested in good faith and, in the case of judgment liens,
execution thereon is stayed; or
(6) Landlords' liens on fixtures located on premises leased by
us or any Restricted Subsidiary in the ordinary course of business;
or
(7) Any Security Interest in favor of any governmental
authority in connection with the financing of the cost of
construction or acquisition of property; or
(8) Any Security Interest arising by reason of deposits to
qualify us or any Restricted Subsidiary to conduct business, to
maintain self-insurance, or to obtain the benefit of, or comply
with, laws; or
(9) Any Security Interest that secures any Indebtedness of a
Restricted Subsidiary owing to us or another Restricted Subsidiary
or by us to a Restricted Subsidiary, or
(10) Any Security Interest incurred in connection with
pollution control, sewage or solid waste disposal, industrial
revenue or similar financing; or
(11) Any Security Interest created by any program providing
for the financing, sale or other disposition of trade or other
receivables qualified as current assets in accordance with United
States generally accepted accounting principles entered into by us
or by any Restricted Subsidiary, provided that such program is on
terms comparable for similar transactions, or any document executed
by us or any Restricted Subsidiary in connection therewith, and
provided that such Security Interest is limited to the trade or
other receivables in respect of which such program is created or
exists and the proceeds thereof, or
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(12) Any extension, renewal or refunding (or successive
extensions, renewals or refundings) in whole or in part of any
Indebtedness secured by any Security Interest referred to in the
foregoing clauses (1) through (11), inclusive, provided that the
Security Interest securing such Indebtedness shall be limited to
the property or assets which, immediately prior to such extension,
renewal or refunding, secured such Indebtedness and additions to
such property or assets.
Notwithstanding the foregoing provisions, we or any of our Restricted
Subsidiaries may create, incur, assume or suffer to exist any Indebtedness
secured by a Security Interest without so securing the Senior Debt Securities of
that series if, at the time such Security Interest becomes a Security Interest
upon any of our or our Restricted Subsidiaries' Principal Property and after
giving effect thereto, the aggregate outstanding principal amount of all
Indebtedness of us and our Restricted Subsidiaries secured by Security Interests
permitted by this sentence (excluding Indebtedness secured by a Security
Interest existing as of the date of the Senior Debt Indenture, but including the
Attributable Debt in respect of Sale and Leaseback Transactions, other than Sale
and Leaseback Transactions which, if the Attributable Debt in respect thereof
had been Indebtedness secured by a Security Interest, would have been permitted
by clause (1)(a) above, other Sale and Leaseback Transactions the proceeds of
which have been applied or committed to be applied in accordance with the
covenant described in "--Provisions Applicable Solely to Senior Debt
Securities--Limitations on Sale and Leaseback Transactions" and other than Sale
and Leaseback Transactions between us and any Restricted Subsidiary) does not
exceed 15% of Consolidated Net Tangible Assets. (Section 1008 of the Senior Debt
Indenture)
(b) If, upon any consolidation or merger of any Restricted Subsidiary
with or into any other corporation, or upon any consolidation or merger
of any other corporation with or into us or any Restricted Subsidiary
or upon any sale or conveyance of the Principal Property of any
Restricted Subsidiary as an entirety or substantially as an entirety to
any other Person, or upon any acquisition by us or any Restricted
Subsidiary by purchase or otherwise of all or any part of the Principal
Property of any other Person, any Principal Property theretofore owned
by us or such Restricted Subsidiary would thereupon become subject to
any Security Interest not permitted by the terms of the foregoing
covenant, we, prior to such consolidation, merger, sale or conveyance,
or acquisition, will, or will cause such Restricted Subsidiary to,
secure payment of the principal of and interest, if any, on the Senior
Debt Securities of that series (equally and ratably with or prior to
any other Indebtedness of us or such Restricted Subsidiary then
entitled thereto) by a direct lien on all such Principal Property prior
to all liens other than any liens theretofore existing thereon by a
supplemental indenture or otherwise. (Section 1008 of the Senior Debt
Indenture)
Limitations on Sale and Leaseback Transactions. Unless provided
otherwise in the applicable prospectus supplement, the provisions of this
covenant shall apply to each series of Senior Debt Securities issued under the
Senior Debt Indenture:
We will not, and will not permit a Restricted Subsidiary to, enter into
any arrangement with any Person (other than with any Restricted Subsidiary)
providing for the leasing to us or any Restricted Subsidiary of any Principal
Property owned or hereafter acquired by us or such Restricted Subsidiary (except
for temporary leases for a term, including any renewal thereof, of not more than
three years and except for leases between us and a Restricted Subsidiary or
between Restricted Subsidiaries), which Principal Property has been or is to be
sold or transferred by us or such Restricted Subsidiary to such person (a "Sale
and Leaseback Transaction") unless (a) we or such Restricted Subsidiary would be
entitled, pursuant to the covenant described in "--Provisions Applicable Solely
to Senior Debt Securities--Limitation on Liens," to incur Indebtedness secured
by a Security Interest on the property to be leased without equally and ratably
securing the Senior Debt Securities of that series, or (b) we shall, and in any
such case we covenant that we will, within 180 days after the effective date of
any such arrangement, apply an amount equal to the fair value (as determined by
the Board of Directors) of such property to the
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redemption of Senior Debt Securities that, by their terms, are subject to
redemption, or to the purchase and retirement of Senior Debt Securities, or to
the payment or other retirement of funded debt for money borrowed, incurred or
assumed by us which ranks senior to or pari passu with the Senior Debt
Securities of that series or of funded debt for money borrowed, incurred or
assumed by any Restricted Subsidiary (other than, in either case, funded debt
owed by us or any Restricted Subsidiary), or (c) we shall within 180 days after
entering into the Sale and Leaseback Transaction, enter into a bona fide
commitment or commitments to expend for the acquisition or capital improvement
of a Principal Property an amount at least equal to the fair value (as
determined by the Board of Directors) of such property. (Section 1009 of the
Senior Debt Indenture)
Notwithstanding the foregoing, we may, and may permit any Restricted
Subsidiary to, effect any Sale and Leaseback Transaction that is not acceptable
pursuant to clauses (a) through (c), inclusive, of the foregoing covenant,
provided that the Attributable Debt associated with such Sale and Leaseback
Transaction, together with the aggregate principal amount of outstanding debt
secured by Security Interests upon Principal Property not acceptable pursuant to
clauses (1) through (12) of the covenant described in "--Provisions Applicable
Solely to Senior Debt Securities--Limitation on Liens," inclusive, do not exceed
15% of Consolidated Net Tangible Assets.
(Section 1009 of the Senior Debt Indenture)
Events of Default. Unless otherwise specified in the applicable
prospectus supplement, an Event of Default is defined under the Senior Debt
Indenture with respect to the Senior Debt Securities of any series issued under
such Senior Debt Indenture as being one or more of the following events:
(1) default in the payment of any interest upon any Senior Debt
Security of that series when it becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Senior Debt Security of that series as and when the same
becomes due and payable whether at Stated Maturity, by declaration of
acceleration, call for redemption or otherwise; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Senior Debt Security of that series; or
(4) default in the performance, or breach, of any of our other
covenants or warranties in the Senior Debt Indenture (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in Section 501 of the Senior Debt Indenture specifically
dealt with or which has expressly been included in the Senior Debt
Indenture solely for the benefit of a series of Senior Debt Securities
other than that series), and continuance of such default or breach for
a period of 60 days after there has been given, by registered or
certified mail, to us by the Trustee or to us and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Senior
Debt Securities of that series a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" under the Senior Debt Indenture; or
(5) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of us in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudging us a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of us under any applicable Federal or
State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of us or of any
substantial part of our property, or ordering the winding up or
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liquidation of our affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 90 consecutive days; or
(6) the commencement by us of a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of us in an involuntary case
or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or the commencement of
any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law, or the consent by
it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of us or of any substantial part of
our property, or the making by us of an assignment for the benefit of
creditors, or the admission by us in writing of our inability to pay
our debts generally as they become due, or the taking of corporate
action by us in furtherance of any such action; or
(7) any other Event of Default provided with respect to Senior Debt
Securities of that series. (Section 501 of the Senior Debt Indenture)
Remedies. If an Event of Default with respect to Senior Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case, either the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Senior Debt Securities of that series may declare the
principal amount (or, if any of the Senior Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal amount of such
Senior Debt Securities as may be specified in the terms thereof) of all of the
Senior Debt Securities of that series to be due and payable immediately, by a
notice in writing to us (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. At any time after such a declaration of
acceleration with respect to the Senior Debt Securities of any series has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee, the Holders of a majority in principal amount of the
Outstanding Senior Debt Securities of that series, by written notice to us and
the Trustee, may rescind and annul such declaration and its consequences if:
(1) we have paid or deposited with the Trustee a sum sufficient to pay:
(A) all overdue interest on all Senior Debt Securities of that series;
(B) the principal of (and premium, if any, on) any Senior Debt
Securities of that series which has become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or
rates prescribed therefor in such Senior Debt Securities;
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in such
Senior Debt Securities; and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Senior Debt Securities of
that series, other than the non-payment of the principal of Senior Debt
Securities of that series which has become due solely by such declaration
of acceleration, have been cured or waived as provided in the Senior Debt
Indenture.
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No such rescission shall affect any subsequent default or impair any
right consequent thereon. (Section 502 of the Senior Debt Indenture) If the
Trustee or any Holder of a Senior Debt Security or coupon has instituted any
proceeding to enforce any right or remedy under the Senior Debt Indenture and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, we, the Trustee and the
Holders of Senior Debt Securities and coupons shall be restored severally and
respectively to their former positions under the Senior Debt Indenture and the
Senior Debt Securities and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
(Section 509 of the Senior Debt Indenture)
The Senior Debt Indenture provides that, subject to the duty of the
Trustee during default to act with the required standard of care, the Trustee is
under no obligation to exercise any of its rights or powers under such Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Sections 601, 603 of the
Senior Debt Indenture) No Holder of any Senior Debt Security of any series or
any related coupons shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Senior Debt Indenture, or for the appointment
of a receiver or trustee, or for any other remedy thereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Senior Debt Securities of
that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Senior Debt Securities of that series shall have been made
written request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee under the Senior Debt
Indenture;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Senior Debt Securities of that series.
(Section 507 of the Senior Debt Indenture)
Notwithstanding any other provisions in the Senior Debt Indenture, the
right of any Holder of any Senior Debt Security or coupon to receive payment of
the principal of and any premium and any interest on such Senior Debt Security
or payment of such coupon on the Stated Maturity or Maturities expressed in such
Senior Debt Security or coupon, or to institute suit for the enforcement of any
such payment on or after such respective dates shall not be impaired or affected
without the consent of such Holder. (Sections 508, 902 of the Senior Debt
Indenture)
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of any series shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, with respect to the
Senior Debt Securities of such series, provided that (1) such direction shall
not be in conflict with any rule of law or with the Senior Debt Indenture; (2)
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction; and (3) the Trustee shall not be obligated to
take any action unduly prejudicial to Holders not joining in such direction or
involving the Trustee in personal
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liability. (Section 512 of the Senior Debt Indenture) The Holders of a majority
in principal amount of the Outstanding Senior Debt Securities of any series may
on behalf of the Holders of all the Senior Debt Securities of such series waive
any past default under the Senior Debt Indenture with respect to the Senior Debt
Securities of such series and its consequences, except a default in the payment
of the principal of or any premium or interest on any Senior Debt Security of
such series or in respect of a covenant or provision of the Senior Debt
Indenture which, pursuant to the Senior Debt Indenture, cannot be modified or
amended without the consent of the Holder of each Outstanding Senior Debt
Security of such series affected. Upon any such waiver, such default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of the Senior Debt Indenture; but no such waiver
shall extend to any subsequent or other default or impair any right consequent
thereon. (Sections 513, 902 of the Senior Debt Indenture)
If a default occurs under the Senior Debt Indenture with respect to
Senior Debt Securities of any series, the Trustee shall give the Holders of
Senior Debt Securities of such series notice of such default as and to the
extent provided by the Trust Indenture Act; provided, however. that in the case
of any default or breach of certain covenants or warranties with respect to
Senior Debt Securities of such series, no such notice to Holders shall be given
until at least 30 days after the occurrence thereof (the term "default" for
purposes of these provisions being defined as any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to the Senior Debt Securities of such series). (Section 602 of the Senior Debt
Indenture)
In any case in which Senior Debt Securities are Outstanding that are
denominated in more than one currency and the Trustee is directed to make
ratable payments under the Senior Debt Indenture to Holders of such Senior Debt
Securities, unless otherwise provided with respect to any series of Senior Debt
Securities, the Trustee shall calculate the amount of such payments as follows:
(i) as of the day the Trustee collects an amount under the Senior
Debt Indenture, the Trustee shall, as to each Holder of a Senior Debt
Security to whom an amount is due and payable under the Senior Debt
Indenture that is denominated in a foreign currency, determine that
amount in Dollars that would be obtained for the amount owing such
Holder, using the rate of exchange at which in accordance with normal
banking procedures the Trustee could purchase in the City of New York
Dollars with such amount owing;
(ii) calculate the sum of all Dollar amounts determined under (i)
and add thereto any amounts due and payable in Dollars; and
(iii) using the individual amounts determined in (i) or any
individual amounts due and payable in Dollars, as the case may be, as a
numerator, and the sum calculated in (ii) as a denominator, calculate
as to each Holder of a Senior Debt Security to whom an amount is owed
under the Senior Debt Indenture the fraction of the amount collected
under the Senior Debt Indenture payable to such Holder.
Any expenses incurred by the Trustee in actually converting amounts
owing Holders of Senior Debt Securities denominated in a currency other than
that in which any amount is collected under the Senior Debt Indenture shall be
likewise (in accordance with the foregoing) borne ratably by all Holders of
Senior Debt Securities to whom amounts are payable under the Senior Debt
Indenture. (Sections 506, 902 of the Senior Debt Indenture)
To the fullest extent allowed under applicable law, if for the purpose
of obtaining judgment against us in any court it is necessary to convert the sum
due in respect of the principal of, or premium, if any, or interest on, the
Senior Debt Securities of any series (the "Required Currency") into a currency
in
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which a judgment will be rendered (the "Judgment Currency"), the rate of
exchange used shall be the rate at which in accordance with normal banking
procedures the Trustee could purchase in the City of New York the Required
Currency with the Judgment Currency on the Business Day in the City of New York
next preceding that on which final judgment is given. Neither we nor the Trustee
shall be liable for any shortfall nor shall either of them benefit from any
windfall in payments to Holders of Senior Debt Securities under this provision
of the Senior Debt Indenture caused by a change in exchange rates between the
time the amount of a judgment against us is calculated as above and the time the
Trustee converts the Judgment Currency into the Required Currency to make
payments under the foregoing provisions of the Senior Debt Indenture to Holders
of Senior Debt Securities, but payment of such judgment shall discharge all
amounts owed by us on the claim or claims underlying such judgment.
(Section 506 of the Senior Debt Indenture)
We are required to furnish to the Trustee annually a statement as to
our compliance with all conditions and covenants under the Senior Debt
Indenture. (Section 1006)
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
Consolidation, Merger, Sale. The Subordinated Debt Indenture provides
that we may not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, unless (1) the Person formed by such consolidation or into which we
merge or the Person which acquires by conveyance or transfer, or which leases,
our properties and assets substantially as an entirety shall be a corporation,
partnership or trust, organized and validly existing under the laws of the
United States, any State thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the principal
of and any premium and interest (including all additional amounts, if any,
payable pursuant to the Subordinated Debt Indenture) on all the Subordinated
Debt Securities and the performance or observance of every other covenant of the
Subordinated Debt Indenture to be performed or observed on our part; and (2)
immediately after giving effect to such transaction and treating any
indebtedness which becomes our or our subsidiaries' obligation as a result of
such transaction as having been incurred by us or such Subsidiary at the time of
such transaction, no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have happened and be
continuing. Upon any consolidation of us with, or merger of us into, any other
Person or any conveyance, transfer or lease of our properties and assets
substantially as an entirety, the successor Person formed by such consolidation
or into which we are merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise our every right
and power under the Subordinated Debt Indenture with the same effect as if such
successor Person had been named as us herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under the Subordinated Debt Indenture and the Subordinated Debt
Securities and coupons and may liquidate and dissolve.
(Sections 801, 802 of the Subordinated Debt Indenture)
Events of Default. Unless otherwise specified in the applicable
prospectus supplement, an Event of Default is defined under the Subordinated
Debt Indenture with respect to the Subordinated Debt Securities of any series
issued under such Subordinated Debt Indenture as being one or more of the
following events:
(1) default in the payment of any interest upon any Subordinated
Debt Security of that series when it becomes due and payable, and
continuance of such default for a period of 30 days; or
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(2) default in the payment of the principal of (or premium, if any,
on) any Subordinated Debt Security of that series as and when the same
becomes due and payable, whether at Stated Maturity or by declaration
of acceleration, call for redemption or otherwise; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Subordinated Debt Security of that series; or
(4) default in the performance, or breach, of any of our other
covenants or warranties in the Subordinated Debt Indenture (other than
a covenant or warranty a default in whose performance or whose breach
is elsewhere in Section 501 of the Subordinated Debt Indenture
specifically dealt with or which has expressly been included in the
Subordinated Debt Indenture solely for the benefit of a series of
Subordinated Debt Securities other than that series), and continuance
of such default or breach for a period of 90 days after there has been
given, by registered or certified mail, to us by the Trustee or to us
and the Trustee by the Holders of at least 25% in principal amount of
the Outstanding Subordinated Debt Securities of that series a written
notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under
the Subordinated Debt Indenture; or
(5) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of us in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudging us a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of us under any applicable Federal or
State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of us or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 90 consecutive days; or
(6) the commencement by us of a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by us to the entry
of a decree or order for relief in respect of us in an involuntary case
or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or the commencement of
any bankruptcy or insolvency case or proceeding against us, or the
filing by us of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law, or the consent by
us to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of us or of any substantial part of
our property, or the making by us of an assignment for the benefit of
creditors, or the admission by us in writing of our inability to pay
our debts generally as they become due, or the taking of corporate
action by us in furtherance of any such action; or
(7) any other Event of Default provided with respect to
Subordinated Debt Securities of that series. (Section 501 of the
Subordinated Debt Indenture)
Remedies. If an Event of Default with respect to Subordinated Debt
Securities of any series at the time Outstanding occurs and is continuing, then
in every such case, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Subordinated Debt Securities of that series may
declare the principal amount (or, if any of the Subordinated Debt Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount of such Subordinated Debt Securities as may be specified in the
terms thereof) of all of the Subordinated Debt Securities of that series to be
due and payable immediately, by a notice in writing to us (and to the Trustee if
given by Holders), and upon any
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such declaration such principal amount (or specified amount) shall become
immediately due and payable. At any time after such a declaration of
acceleration with respect to the Subordinated Debt Securities of any series has
been made and before a judgment or decree for payment of the money due has been
obtained by the Trustee, the Holders of a majority in principal amount of the
Outstanding Subordinated Debt Securities of that series, by written notice to us
and the Trustee, may rescind and annul such declaration and its consequences if:
(1) we have paid or deposited with the Trustee a sum sufficient to
pay:
(A) all overdue interest on all Subordinated Debt Securities of
that series;
(B) the principal of (and premium, if any, on) any Subordinated
Debt Securities of that series which has become due otherwise than
by such declaration of acceleration and any interest thereon at the
rate or rates prescribed therefor in such Subordinated Debt
Securities;
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in
such Subordinated Debt Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Subordinated Debt
Securities of that series, other than the non-payment of the principal
of Subordinated Debt Securities of that series which has become due
solely by such declaration of acceleration, have been cured or waived
as provided in the Subordinated Debt Indenture.
No such rescission shall affect any subsequent default or impair any
right consequent thereon. (Section 502 of the Subordinated Debt Indenture) If
the Trustee or any Holder of a Subordinated Debt Security or coupon has
instituted any proceeding to enforce any right or remedy under the Subordinated
Debt Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, we, the
Trustee and the Holders of Subordinated Debt Securities and coupons shall be
restored severally and respectively to their former positions under the
Subordinated Debt Indenture and the Subordinated Debt Securities and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted. (Section 509 of the Subordinated Debt
Indenture)
The Subordinated Debt Indenture provides that, subject to the duty of
the Trustee during default to act with the required standard of care, the
Trustee is under no obligation to exercise any of its rights or powers under
such Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Sections 601,
603 of the Subordinated Debt Indenture) No Holder of any Subordinated Debt
Security of any series or any related coupons shall have any right to institute
any proceeding, judicial or otherwise, with respect to the Subordinated Debt
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy thereunder, unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Subordinated Debt
Securities of that series;
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(2) the Holders of not less than 25% in principal amount of the
Outstanding Subordinated Debt Securities of that series shall have made
written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee under the Subordinated
Debt Indenture;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Subordinated Debt
Securities of that series. (Section 507 of the Subordinated Debt
Indenture)
Notwithstanding any other provisions in the Subordinated Debt
Indenture, but subject to the subordination provisions of the Subordinated Debt
Indenture, the right of any Holder of any Subordinated Debt Security or coupon
to receive payment of the principal of and any premium and any interest on such
Subordinated Debt Security or payment of such coupon on the Stated Maturity or
Maturities expressed in such Subordinated Debt Security or coupon and, if
applicable, to convert such Subordinated Debt Security as provided in the
conversion provisions of the Subordinated Debt Indenture and to institute suit
for the enforcement of any such payment or conversion right shall not be
impaired without the consent of such Holder. (Sections 508, 902 of the
Subordinated Debt Indenture)
The Holders of a majority in principal amount of the Outstanding
Subordinated Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Subordinated Debt Securities of such series, provided that (1)
such direction shall not be in conflict with any rule of law or with the
Subordinated Debt Indenture; (2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction; and (3) the
Trustee shall not be obligated to take any action unduly prejudicial to Holders
not joining in such direction or involving the Trustee in personal liability.
(Section 512 of the Subordinated Debt Indenture) The Holders of a majority in
principal amount of the Outstanding Subordinated Debt Securities of any series
may on behalf of the Holders of all the Subordinated Debt Securities of such
series waive any past default under the Subordinated Debt Indenture with respect
to the Subordinated Debt Securities of such series and its consequences, except
a default in the payment of the principal of or any premium or interest on any
Subordinated Debt Security of such series or in respect of a covenant or
provision of the Subordinated Debt Indenture which, pursuant to the Subordinated
Debt Indenture, cannot be modified or amended without the consent of the Holder
of each Outstanding Subordinated Debt Security of such series affected. Upon any
such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of the
Subordinated Debt Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon. (Sections 902, 513 of
the Subordinated Debt Indenture)
If a default occurs under the Subordinated Debt Indenture with respect
to Subordinated Debt Securities of any series, the Trustee shall give the
Holders of Subordinated Debt Securities of such series notice of such default as
and to the extent provided by the Trust Indenture Act; provided, however, that
in the case of any default or breach of certain covenants or warranties with
respect to Subordinated Debt Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof (the
term "default" for purposes of these provisions being defined as any event which
is, or after
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notice or lapse of time or both would become, an Event of Default with respect
to the Subordinated Debt Securities of such series). (Section 602 of the
Subordinated Debt Indenture)
In any case in which Subordinated Debt Securities are Outstanding that
are denominated in more than one currency and the Trustee is directed to make
ratable payments under the Subordinated Debt Indenture to Holders of such
Subordinated Debt Securities, unless otherwise provided with respect to any
series of Subordinated Debt Securities, the Trustee shall calculate the amount
of such payments as follows:
(i) as of the day the Trustee collects an amount under the
Subordinated Debt Indenture, the Trustee shall, as to each Holder of a
Subordinated Debt Security to whom an amount is due and payable under
the Subordinated Debt Indenture that is denominated in a foreign
currency, determine that amount in Dollars that would be obtained for
the amount owing such Holder, using the rate of exchange at which in
accordance with normal banking procedures the Trustee could purchase in
the City of New York Dollars with such amount owing;
(ii) calculate the sum of all Dollar amounts determined under (i)
and add thereto any amounts due and payable in Dollars; and
(iii) using the individual amounts determined in (i) or any
individual amounts due and payable in Dollars, as the case may be, as a
numerator, and the sum calculated in (ii) as a denominator, calculate
as to each Holder of a Subordinated Debt Security to whom an amount is
owed under the Subordinated Debt Indenture the fraction of the amount
collected under the Subordinated Debt Indenture payable to such Holder.
Any expenses incurred by the Trustee in actually converting amounts
owing Holders of Subordinated Debt Securities denominated in a currency other
than that in which any amount is collected under the Subordinated Debt Indenture
shall be likewise (in accordance with the foregoing) borne ratably by all
Holders of Subordinated Debt Securities to whom amounts are payable under the
Subordinated Debt Indenture. (Section 506 of the Subordinated Debt Indenture)
To the fullest extent allowed under applicable law, if for the purpose
of obtaining judgment against us in any court it is necessary to convert the sum
due in respect of the principal of, or premium, if any, or interest on, the
Subordinated Debt Securities of any series (the "Required Currency") into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in the City of New York the
Required Currency with the Judgment Currency on the Business Day in the City of
New York next preceding that on which final judgment is given. Neither we nor
the Trustee shall be liable for any shortfall nor shall we benefit from any
windfall in payments to Holders of Subordinated Debt Securities under the
Subordinated Debt Indenture caused by a change in exchange rates between the
time the amount of a judgment against us is calculated as above and the time the
Trustee converts the Judgment Currency into the Required Currency to make
payments under the foregoing provisions of the Subordinated Debt Indenture to
Holders of Subordinated Debt Securities, but payment of such judgment shall
discharge all amounts owed by us on the claim or claims underlying such
judgment. (Section 506 of the Subordinated Debt Indenture)
We are required to furnish to the Trustee annually a statement as to
our compliance with all conditions and covenants under the Subordinated Debt
Indenture. (Section 1007 of the Subordinated Debt Indenture)
Subordination. The Subordinated Debt Securities will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated Debt
Indenture, to all our Senior Indebtedness (as
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defined below). If we should default in the payment of any principal of or
premium or interest on any Senior Indebtedness when the same become due and
payable, whether at maturity or a date fixed for prepayment or by declaration of
acceleration or otherwise, then, upon written notice of such default to us by
the holders of such Senior Indebtedness or any trustee therefor and subject to
certain of our rights to dispute such default and subject to proper notification
of the Trustee, unless and until such default has been cured or waived or ceases
to exist, no direct or indirect payment (in cash, property, securities, by
set-off or otherwise) will be made or agreed to be made for principal or
premium, if any, or interest, if any, on the Subordinated Debt Securities, or in
respect of any redemption, retirement, purchase or other acquisition of the
Subordinated Debt Securities other than those made in our capital stock (or cash
in lieu of fractional shares thereof) pursuant to any conversion right of the
Subordinated Debt Securities or otherwise made in our capital stock. (Sections
1601, 1604 and 1605 of the Subordinated Debt Indenture)
"Senior Indebtedness" is defined in Section 101 of the Subordinated
Debt Indenture as our Indebtedness (as defined below) outstanding at any time
except:
(a) any Indebtedness as to which, by the terms of the instrument
creating or evidencing the same, it is provided that such Indebtedness
is not senior in right of payment to the Subordinated Debt Securities;
(b) the Subordinated Debt Securities;
(c) any of our Indebtedness to any wholly-owned Subsidiary;
(d) interest accruing after the filing of a petition initiating certain
bankruptcy or insolvency proceedings unless such interest is an allowed
claim enforceable against us in a proceeding under federal or state
bankruptcy laws;
(e) obligations under performance guarantees, support agreements and
other agreements in the nature thereof relating to the obligations of
any Subsidiary, and
(f) trade accounts payable.
"Indebtedness" is defined in Section 101 of the Subordinated Debt
Indenture as, with respect to any Person:
(a) (i) the principal of and interest and premium, if any, on
indebtedness for money borrowed of such Person evidenced by bonds,
notes, debentures or similar obligations, including any guaranty by
such Person of any indebtedness for money borrowed of any other Person,
whether any such indebtedness or guaranty is outstanding on the date of
the Subordinated Debt Indenture or is thereafter created, assumed or
incurred;
(ii) the principal of and premium and interest, if any, on
indebtedness for money borrowed, incurred, assumed or guaranteed by
such Person in connection with the acquisition by it or any of its
subsidiaries of any other businesses properties or other assets; and
(iii) lease obligations which such Person capitalizes in
accordance with Statement of Financial Accounting Standards No. 13
promulgated by the Financial Accounting Standards Board or such other
generally accepted accounting principles as may be from time to time
in effect,
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(b) any other indebtedness of such Person, including any indebtedness
representing the balance deferred and unpaid of the purchase price of
any property or interest therein, including any such balance that
constitutes a trade account payable, and any guaranty, endorsement or
other contingent obligation of such Person in respect of any
indebtedness of another, which is outstanding on the date of the
Subordinated Debt Indenture or is thereafter created, assumed or
incurred by such Person; and
(c) any amendments, modifications, refundings, renewals or extensions
of any indebtedness or obligation described as Indebtedness in clause
(a) or (b) above.
If (i) without our consent a court having jurisdiction shall enter (A)
an order for relief with respect to us under the United States federal
bankruptcy laws, (B) a judgment, order or decree adjudging us a bankrupt or
insolvent, or (C) an order for relief for reorganization, arrangement,
adjustment or composition of or in respect of us under the United States federal
bankruptcy laws or state insolvency laws or (ii) we shall institute proceedings
for the entry of an order for relief with respect to us under the United States
federal bankruptcy laws or for an adjudication of insolvency, or shall consent
to the institution of bankruptcy or insolvency proceedings against us, or shall
file a petition seeking, or seek or consent to reorganization, arrangement,
composition or similar relief under the United States federal bankruptcy laws or
any applicable state law, or shall consent to the filing of such petition or to
the appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or similar official in respect of us or of substantially all of our
property, or we shall make a general assignment for the benefit of creditors as
recognized under the United States federal bankruptcy laws, then all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) will first be paid in full before any payment or
distribution, whether in cash, securities or other property, may be made to any
Holder of Subordinated Debt Securities on account thereof. In such event, any
payment or distribution, whether in cash, securities or other property (other
than our securities or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions with respect to the
Subordinated Debt Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or deliverable in respect of Subordinated
Debt Securities of any series will be paid or delivered directly to the holders
of Senior Indebtedness in accordance with the priorities then existing among
such holders until all Senior Indebtedness (including any interest thereon
accruing after the commencement of any such proceedings) has been paid in full.
If any payment or distribution of any character, whether in cash, securities or
other property (other than our securities or any other corporation provided for
by a plan of reorganization or readjustment the payment of which is subordinate,
at least to the extent provided in the subordination provisions with respect to
the Subordinated Debt Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), shall be received by the Trustee or any
holder of any Subordinated Debt Securities in contravention of any of the terms
of the Subordinated Debt Indenture, such payment or distribution will be
received in trust for the benefit of, and will be paid over or delivered and
transferred to, the holders of the Senior Indebtedness then outstanding in
accordance with the priorities then existing among such holders for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all such Senior Indebtedness in full. In the event of the
failure of the Trustee or any holder to endorse or assign any such payment,
distribution or security, each Holder of Senior Indebtedness is irrevocably
authorized to endorse or assign the same. In the event of any such proceeding,
after payment in full of all sums owing with respect to Senior Indebtedness, the
holders of Subordinated Debt Securities, together with the holders of any of our
other obligations ranking on a parity with the Subordinated Debt Securities,
will be entitled to be repaid from our remaining assets the amounts at that time
due and owing on account of unpaid principal of and any premium and interest on
the Subordinated Debt Securities and such other obligations before any payment
or other distribution, whether in cash,
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property or otherwise, shall be made on account of any of our capital stock or
obligations ranking junior to the Subordinated Debt Securities and such other
obligations. (Section 1601 of the Subordinated Debt Indenture)
The Subordinated Debt Indenture provides that Senior Indebtedness shall
not be deemed to have been paid in full unless the holders thereof shall have
received cash, securities or other property equal to the amount of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, the holders of Subordinated Debt Securities of each series shall
be subrogated to all rights of any holders of Senior Indebtedness to receive any
further payments or distributions applicable to such Senior Indebtedness until
the indebtedness evidenced by the Subordinated Debt Securities of such series
shall have been paid in full, and such payments or distributions received by
such Holders, by reason of such subrogation, of cash, securities or other
property that otherwise would be paid or distributed to the holders of Senior
Indebtedness, shall, as between us and our creditors other than the holders of
such Senior Indebtedness, on the one hand, and such Holders, on the other hand,
be deemed to be a payment by us on account of such Senior Indebtedness, and not
on account of the Subordinated Debt Securities of such series. (Section 1601 of
the Subordinated Debt Indenture)
The prospectus supplement respecting any series of Subordinated Debt
Securities will set forth any subordination provisions applicable to such series
in addition to or different from those described above.
By reason of such subordination, in the event of a liquidation,
bankruptcy, reorganization, insolvency, receivership or similar proceeding
involving us or an assignment for the benefit of creditors of us or any of our
Subsidiaries or a marshaling of assets or liabilities of us and our
Subsidiaries, holders of Senior Indebtedness and holders of our other
obligations that are not subordinated to Senior Indebtedness may receive more,
ratably, than holders of the Subordinated Debt Securities. Such subordination
will not prevent the occurrence of any Default or Event of Default or limit the
rights of the Trustee or any Holder, subject to the other provisions of the
Subordinated Debt indenture, to pursue any other rights or remedies with respect
to the Subordinated Debt Securities.
Conversion. The Subordinated Debt Indenture may provide for a right of
conversion of Subordinated Debt Securities into common stock (or cash in lieu
thereof). (Sections 301 and 1501 of the Subordinated Debt Indenture) The
following provisions will apply to Debt Securities that are convertible
Subordinated Debt Securities unless otherwise provided in the applicable
prospectus supplement for such Debt Securities.
The holder of any convertible Subordinated Debt Securities will have
the right exercisable at any time prior to maturity, unless previously redeemed
or otherwise purchased by us, to convert such Subordinated Debt Securities into
shares of common stock at the conversion price or conversion rate set forth in
the applicable prospectus supplement, subject to adjustment. (Section 1502 of
the Subordinated Debt Indenture) The holder of convertible Subordinated Debt
Securities may convert any portion thereof which is $1,000 in principal amount
or any integral multiple thereof. (Section 1502 of the Subordinated Debt
Indenture)
In certain events, the conversion price or conversion rate will be
subject to adjustment as set forth in the Subordinated Debt Indenture. Such
events include the issuance of shares of our common stock as a dividend or
distribution on the common stock; subdivisions, combinations and
reclassifications of the common stock; the issuance to all holders of common
stock of rights or warrants entitling the holders thereof (for a period not
exceeding 45 days) to subscribe for or purchase shares of common stock at a
price per share less than the then current market price per share of common
stock (as determined pursuant to the Subordinated Debt Indenture); and the
distribution to substantially all holders of common stock of evidences of
indebtedness, equity securities (including equity interests in our Subsidiaries)
other than
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common stock, or other assets (excluding cash dividends paid from surplus) or
rights or warrants to subscribe for securities (other than those referred to
above). No adjustment of the conversion price or conversion rate will be
required unless an adjustment would require a cumulative increase or decrease of
at least 1% in such price or rate. (Section 1504 of the Subordinated Debt
Indenture) We have been advised by our counsel that certain adjustments in the
conversion price or conversion rate in accordance with the foregoing provisions
may result in constructive distributions to either holders of the Subordinated
Debt Securities or holders of common stock which would be taxable pursuant to
Treasury Regulations issued under Section 305 of the Internal Revenue Code of
1986, as amended. The amount of any such taxable constructive distribution would
be the fair market value of the common stock which is treated as having been
constructively received, such value being determined as of the time the
adjustment resulting in the constructive distribution is made.
Fractional shares of common stock will not be issued upon conversion,
but, in lieu thereof, we will pay a cash adjustment based on the then current
market price for the common stock. (Section 1503 of the Subordinated Debt
Indenture) Upon conversion, no adjustments will be made for accrued interest or
dividends, and therefore convertible Subordinated Debt Securities surrendered
for conversion between an Interest Payment Date and on or prior to the record
date pertaining to the subsequent Interest Payment Date will not be considered
Outstanding and no interest will be paid on the related Interest Payment Date.
Convertible Subordinated Debt Securities (except convertible Subordinated Debt
Securities called for redemption on a redemption date during such period)
surrendered for conversion during the period between the close of business on
any record date for an Interest Payment Date for such convertible Subordinated
Debt Security and the opening of business on the related Interest Payment Date
shall be considered Outstanding for purposes of payment of interest, and,
therefore, must be accompanied by payment of an amount equal to the interest
payable thereon on such Interest Payment Date.
(Sections 1504 and 1502 of the Subordinated Debt Indenture)
In the case of any consolidation or merger of us (with certain
exceptions) or any conveyance, transfer or lease of our properties and assets
substantially as an entirety to any Person, each holder of convertible
Subordinated Debt Securities, after the consolidation, merger, conveyance,
transfer or lease, will have the right to convert such convertible Subordinated
Debt Securities only into the kind and amount of securities, cash and other
property which the holder would have been entitled to receive upon or in
connection with such consolidation, merger, conveyance, transfer or lease, if
the holder had held the common stock issuable upon conversion of such
convertible Subordinated Debt Securities immediately prior to such
consolidation, merger, conveyance, transfer or lease. (Section 1505 of the
Subordinated Debt Indenture)
DESCRIPTION OF CAPITAL STOCK
GENERAL
We are authorized to issue 1,500,000,000 shares of common stock, of
which 627,807,809 shares were outstanding at January 4, 2000. We are also
authorized to issue 10,000,000 shares of preferred stock, none of which were
outstanding on that date.
COMMON STOCK
Dividends. Holders of common stock are entitled to receive dividends
when declared by our Board of Directors. In certain cases, common stockholders
may not receive dividends until we satisfy our obligations to any preferred
stockholders.
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Voting Rights. Each share of common stock is entitled to one vote in
the election of directors and in each other matter we may ask stockholders to
vote on. Common stockholders do not have cumulative voting rights. Accordingly,
the holders of a majority of shares voting for the election of directors can
elect all of the directors standing for election. Because members of our Board
of Directors serve staggered three-year terms, only about one third of our
directors are elected each year.
Fully Paid Status. All outstanding shares of our common stock are
validly issued, fully paid and non-assessable. The shares offered hereby will
also be, upon issuance and sale, validly issued, fully paid and non-assessable.
Liquidation or Dissolution. If we liquidate, dissolve or wind up our
business, whether or not voluntarily, common stockholders will share ratably in
the assets remaining after we pay our creditors and any preferred stockholders.
Listing. Our common stock is listed on the New York Stock Exchange
under the trading symbol "WMI."
Transfer Agent and Registrar. The transfer agent and registrar for the
common stock is Harris Trust and Savings Bank, Chicago, Illinois.
PREFERRED STOCK
The Board of Directors is authorized, without obtaining stockholder
approval, to issue one or more series of preferred stock. The Board's authority
includes determining the number of shares of each series and the rights,
preferences and limitations of each series, including voting rights, dividend
rights, conversion rights, redemption rights and any liquidation preferences. In
this regard, the Board may issue preferred stock with voting and conversion
rights that could adversely affect the voting power of the holders of common
stock, and dividend or liquidation preferences that would restrict common stock
dividends or adversely affect the assets available for distribution to holders
of shares of common stock in the event of our dissolution.
AUTHORIZED BUT UNISSUED SHARES
Authorized but unissued shares of common stock or preferred stock can
be reserved for issuance by the Board of Directors from time to time, without
stockholder action, for stock dividends or stock splits, to raise equity capital
and to structure future corporate transactions, including acquisitions, as well
as for other proper corporate purposes. Stockholders have no preemptive rights.
DELAWARE LAW AND CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION
We are a Delaware corporation and are governed by the Delaware General
Corporation Law, in addition to our Restated Certificate of Incorporation and
Bylaws, certain provisions of which are summarized below. You should read the
actual provisions of these documents.
Section 203 of the Delaware law provides that an "Interested
Stockholder," which is generally defined to mean any beneficial owner of 15% to
85% of the corporation's voting stock, may not engage in any "business
combination" with the corporation for a period of three years after the date on
which the person became an Interested Stockholder, unless:
o prior to such date, the corporation's board of directors approved
either the business combination or the transaction in which the
stockholder became an Interested Stockholder; or
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o subsequent to such date, the business combination is approved by the
corporation's board of directors and authorized at a stockholders'
meeting by a vote of at least two-thirds of the corporation's
outstanding voting stock not owned by the Interested Stockholder.
Section 203 defines the term "business combination" to include mergers,
asset sales and other transactions resulting in a financial benefit to the
Interested Stockholder.
The provisions of Section 203, combined with the Board of Directors'
authority to issue preferred stock without further stockholder action, could
delay or frustrate a change in control or discourage, impede or prevent a
merger, tender offer or proxy contest involving us, even if such an event would
be favorable to the interests of our stockholders. Our stockholders, by adopting
an amendment to the Restated Certificate of Incorporation, may elect not to be
governed by Section 203. Such an election would be effective 12 months after its
adoption.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Restated Certificate of Incorporation provides that our directors
are not liable for monetary damages for breaches of their fiduciary duty as
directors, unless they violated their duty of loyalty to us or our stockholders,
acted in bad faith, knowingly or intentionally violated the law, authorized
illegal dividends or redemptions or derived an improper personal benefit from
their action as directors.
In addition, our Bylaws provide for indemnification of each officer and
director to the fullest extent permitted by Delaware law. Section 145 of the
Delaware General Corporation Law grants us the power to indemnify each officer
and director against liabilities and expenses incurred by reason of the fact
that he is or was an officer or director if the individual (1) acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the company, and (2) with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful.
We have also purchased directors' and officers' liability insurance.
Section 145 of the Delaware General Corporation Law allows us to purchase such
insurance whether or not we would have the power to indemnify an officer or
director under the provisions of Section 145.
We also have entered into contracts with certain of our directors and
executive officers to pay the reasonable fees and expenses of his or her
counsel, as well as any judgments, fines, penalties, excise taxes, amounts paid
in settlement and other liabilities, which the individual may incur in any claim
or proceeding (including an action on our behalf) by reason of having served us
as a director, officer, agent or fiduciary. These agreements also provide for us
to pay the individual's defense costs before the proceeding is over, so long as
the director or officer undertakes to repay us should a court later determine
that the director or officer was not entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers or controlling persons
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
PLAN OF DISTRIBUTION
We may sell the securities to or through underwriters or dealers, and
we also may sell the securities directly to other purchasers or through agents.
We may also issue shares of our common stock directly to certain persons in
order to settle litigation and other claims or to satisfy judgments or
arbitration awards.
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The distribution of the securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of the securities, underwriters may receive
compensation from us, or purchasers of securities for whom they may act as
agents in the form of discounts, concessions or commissions. Underwriters,
dealers and agents that participate in the distribution of securities may be
deemed to be underwriters, and any discounts or commissions they receive from us
or the purchasers of securities, and any profit on their resale of securities
may be deemed to be underwriting discounts and commissions under the Securities
Act. We will identify any person deemed to be an underwriter and will describe
the compensation they receive from us in a prospectus supplement.
Debt securities, when first issued, will have no established trading
market. If we sell debt securities to or through any underwriters or agents for
public offering and sale, they may make a market in those debt securities.
However, the underwriters or agents will not be obligated to do so and may
discontinue any market making at any time without notice. There can be no
assurance as to the liquidity of any market that may develop for the debt
securities.
We may enter into agreements with underwriters, dealers and agents who
participate in the distribution of securities that could entitle them to
indemnification by us against or contribution from us toward certain
liabilities, including liabilities under the Securities Act.
DELAYED DELIVERY ARRANGEMENT
If so indicated in a prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by certain
institutions to purchase debt securities from us pursuant to contracts providing
for payment and delivery on a future date. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others, but in all cases will be subject to our approval. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of the debt securities shall not at the time of delivery be prohibited
under the laws of any jurisdiction to which such purchaser is subject. The
underwriters and such agents will not be responsible for the validity or
performance of those contracts.
VALIDITY OF SECURITIES
The validity of the securities has been passed upon for us by Locke
Liddell & Sapp LLP, and certain legal matters will be passed upon for any
agents, dealers or underwriters, by counsel named in the applicable prospectus
supplement.
EXPERTS
The audited consolidated financial statements for the year ended
December 31, 1998 appearing in Waste Management's Current Report on Form 8-K
dated September 16, 1999 incorporated by reference in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their report. In their report, that firm states that, with respect to USA Waste
Services, Inc. and its Subsidiaries as of December 31, 1997 and for each of the
years in the two-year period then ended, its
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opinion is based on reports of other auditors, namely PricewaterhouseCoopers
LLP. The financial statements of Waste Management referred to above have been
included herein in reliance upon the authority of those firms as experts in
giving said reports.
During the quarter ended September 30, 1999, the Company conducted a
review of its accounting records, systems, processes and controls. Based on that
review, the Company has concluded that its internal controls for the preparation
of interim financial information did not provide its independent public
accountants an adequate basis to complete reviews of the quarterly data for the
quarters in the nine-month period ended September 30, 1999. Our independent
public accountants have advised the Company that their report on the December
31, 1999 financial statements will include the following paragraph:
"The selected quarterly financial data included in the
Company's financial statements contain information that we did
not audit, and accordingly, we do not express an opinion on
that data. We attempted, but were unable to, review that
quarterly data in accordance with standards established by the
American Institute of Certified Public Accountants because we
believe that the Company's internal controls for the
preparation of interim financial information do not provide an
adequate basis to enable us to complete such a review."
The audited consolidated financial statements of USA Waste Services,
Inc. as of December 31, 1997 and for the years ended December 31, 1997 and 1996,
not separately incorporated by reference in this prospectus, have been audited
by PricewaterhouseCoopers LLP, independent accountants, whose report thereon is
incorporated by reference herein. Such financial statements, to the extent they
have been included in the financial statements of Waste Management, Inc., have
been so included in reliance on the report of such independent accountants given
on the authority of said firm as experts in auditing and accounting.
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