Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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WASTE SYSTEMS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its Charter)
and the subsidiary guarantors identified in Footnote (A) below
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DELAWARE 95-420366
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
(For Co-Registrants; please For Co-Registrants; please
see Footnote (A) below) see Footnote (A) below)
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420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
(781) 862-3000
(Address, including zip code, and telephone number, including area code, of
Co-Registrants' principal executive office)
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PHILIP W. STRAUSS
Chairman, Chief Executive Officer and President
WASTE SYSTEMS INTERNATIONAL, INC.
420 Bedford Street, Suite 300
Lexington, Massachusetts 02420
(781) 862-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
THOMAS P. STORER, P.C.
GOODWIN, PROCTER & HOAR LLP
Exchange Place
Boston, MA 02109
(617) 570-1000
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement, as determined by
the Registrant.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. [X]
If this form is used to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<S> <C> <C> <C> <C>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------- ------------- ----------------- ---------------- -----------------
Proposed Proposed
Title of Each Class of Amount Maximum Maximum
Securities to be Registered to be Offering Price Aggregate Amount of
Registered Per Note (1) Offering Price Registration Fee
- ------------------------------------------------- ------------- ----------------- ---------------- -----------------
11 1/2% Senior Notes due 2006 $22,500,000 100% $22,500,000 $6,255
- ------------------------------------------------- ------------- ----------------- ---------------- -----------------
Subsidiary Guarantees - - - $0 (2)
- ------------------------------------------------- ------------- ----------------- ---------------- =================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(1) under the Securities Act of 1933, as amended
(the "Securities Act").
(2) Pursuant to Rule 457(n) under the Securities Act.
The Co-Registrants amend this registration statement on such date or dates
as may be necessary to delay its effective date until the Co-Registrants shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
(A) The following direct or indirect wholly owned subsidiaries of Waste
Systems International, Inc. are guarantors of the notes and are Co-Registrants,
each of which is incorporated in the jurisdiction and has the I.R.S. Employer
Identification Number indicated:
WSI Medical Waste Systems, Inc., a Delaware corporation (04-3377563);
Biosafe Systems, Inc., a Delaware corporation (34-4027808); WSI New York
Holdings, Inc., a Delaware corporation (04-3428760); WSI of New York, Inc.,
a Delaware corporation (04-3434005); Palmer Resource Recovery Corp., a New
York corporation (16-1557988); WSI Camden Transfer Station, Inc., a
Delaware corporation (04-3457679); WSI Vermont Holdings, Inc., a Delaware
corporation (04-0347845); WSI of Vermont, Inc., a Delaware corporation
(04-0354296); WSI Moretown Landfill, Inc., a Delaware corporation
(03-0355691); WSI Burlington Transfer Station, Inc., a Delaware corporation
(04-3374689); WSI St. Johnsbury Transfer Station, Inc., a Delaware
corporation (03-0356503); WSI Waitsfield Transfer Station, Inc., a Delaware
corporation (04-3292469); WSI Massachusetts Holdings, Inc., a Delaware
corporation (04-3301441); WSI Massachusetts Recycling, Inc., a Delaware
corporation (04-3470404); WSI of Massachusetts Hauling, Inc., a Delaware
corporation (04-3301442); WSI of South Hadley, Inc., a Delaware corporation
(04-3086959); WSI Oxford Transfer Station, Inc., a Delaware corporation
(04-3454163); WSI Maryland Holdings, Inc., a Delaware corporation
(04-3428758); Eastern Trans-Waste of Maryland, Inc., a Maryland corporation
(52-1294346); WSI Pennsylvania Holdings, Inc., a Delaware corporation
(04-3301448); WSI Altoona Hauling, Inc., a Delaware corporation
(04-3301449); WSI Hopewell Landfill, Inc., a Delaware corporation
(04-3301445); WSI Somerset Hauling, Inc., a Delaware corporation
(04-3460153); Community Refuse Service, Inc., a Pennsylvania corporation
(23-1554822); WSI Harrisburg Hauling, Inc., a Delaware corporation
(04-3301450); and Mostoller Landfill, Inc., a Pennsylvania corporation
(25-1622775). (Exact names of Co-Registrants as specified in their
Charters)
<PAGE>
Subject to completion, dated August 5, 1999
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet been declared effective.
These securities may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there by any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of such state.
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PROSPECTUS
Waste Systems International, Inc.
$22,500,000 aggregate principal amount 11 1/2% Senior Notes Due 2006
offered for resale
(4)
o The person listed as the selling noteholder in this prospectus is
offering up to $22,500,000 aggregate principal amount of 11 1/2% Senior
Notes due 2006 of Waste Systems.
o The selling noteholder may offer its shares through public or private
transactions, in the Private Offering Resales and Trading through
Automated Linkages or "PORTAL" market and at prevailing market prices
or at privately negotiated prices.
o The senior notes may be sold directly or through agents or
broker-dealers acting as principal or agent. The selling noteholders
may engage underwriters, brokers, dealers or agents, who may receive
commissions or discounts from the selling noteholders.
Waste Systems will not receive any proceeds from the sale of the senior notes by
the selling noteholder. We will pay substantially all of the expenses
incident to the registration of these notes, except for the selling
commissions if any.
o Waste Systems is an integrated non-hazardous solid waste management
company that provides waste collection, recycling, transfer and disposal
services to commercial, industrial, residential and municipal customers
within some regional markets in the Northeast and Mid-Atlantic states
where we operate.
o Waste Systems is a Delaware corporation, with principal executive offices
located at 420 Bedford Street, Suite 300, Lexington, Massachusetts 02420;
our telephone number is (781) 862-3000.
Consider carefully the "Risk Factors"
beginning on page 10 of this
prospectus.
--------------------
The information in this prospectus is not complete and may be changed. These
securities may not be sold nor may offers to buy be accepted until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, nor have any of
these organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is August __, 1999
TABLE OF CONTENTS
Page
FORWARD-LOOKING STATEMENTS.....................................................1
PROSPECTUS SUMMARY.............................................................1
THE OFFERED SENIOR NOTES.......................................................1
THE EXCHANGE OFFER FOR $77,500,000 AGGREGATE PRINCIPAL
AMOUNTOF OLD SENIOR NOTES......................................................2
THE COMPANY....................................................................3
SUMMARY OF TERMS OF THE SENIOR NOTES...........................................6
RISK FACTORS..................................................................10
The trading price for the Senior Notes may be volatile.......................10
Payment of principal and interest on the Senior Notes
is subordinated to our secured debt and our
subsidiaries'secured debt...................................................10
A court may declare the subsidiary guarantees void,
subordinated or take other actions detrimental to you.......................10
We may be unable to meet our obligations to repurchase
the Senior Notes upon a change of control...................................11
Our history of losses make the Senior Notes a highly
speculative investment......................................................11
Our high level of indebtedness could adversely affect our
financial health............................................................12
Incurring more debt could further exacerbate the risks of
our high level of indebtedness..............................................13
We may not generate enough cash to service our indebtedness
or our other liquidity needs................................................13
We have no control over many factors in our ability to
finance planned growth......................................................13
Our future success depends upon our ability to manage
rapid growth in operations and personnel....................................14
Our future success depends upon our ability to identify,
acquire and integrate acquisition targets...................................14
Loss of key executives could affect Waste Systems's
ability to achieve Waste Systems's business objectives......................14
Failed acquisitions or projects may adversely affect our
results of operations and financial condition...............................14
Our business may not succeed due to the highly competitive
nature of the solid waste management industry...............................15
Seasonal revenue fluctuations may negatively impact our
operations..................................................................15
The geographic concentration of our operations magnifies the
risks to our success........................................................16
Potential difficulties in acquiring landfill capacity could
increase our costs..........................................................16
Failure to obtain landfill closure performance bonds and
letters of credit may adversely affect our business.........................16
Estimated accruals for landfill closure and post-closure
costs may not meet our actual financial obligations.........................16
Environmental and other government regulations impose
costs and uncertainty on our operations.....................................17
We are exposed to potential liability for environmental
damage and regulatory noncompliance.........................................17
Our environmental liability insurance may not cover all
risks of loss...............................................................17
Addressing local community concerns about our operations
may adversely affect our business...........................................17
Year 2000 problems could have an adverse impact on our
business....................................................................18
RECENT DEVELOPMENTS...........................................................19
DESCRIPTION OF SENIOR NOTES...................................................22
Subsidiary Guarantees...................................................22
Redemption..............................................................23
Ranking.................................................................24
Change of Control.......................................................24
Certain Covenants.......................................................25
Merger, Consolidation or Sale of Assets.................................37
Events of Default.......................................................37
Defeasance..............................................................39
Satisfaction and Discharge of the Indenture.............................41
Transfer and Exchange...................................................41
Amendments and Waivers..................................................41
Concerning the Trustee..................................................43
Governing Law...........................................................43
Certain Definitions.....................................................43
BOOK-ENTRY; DELIVERY AND FORM.................................................55
SELLING NOTEHOLDER............................................................58
PLAN OF DISTRIBUTION..........................................................59
USE OF PROCEEDS...............................................................60
LEGAL MATTERS.................................................................61
EXPERTS.......................................................................61
WHERE YOU MAY FIND MORE INFORMATION...........................................62
DOCUMENTS INCORPORATED BY REFERENCE...........................................62
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes both historical and forward-looking
statements. These forward-looking statements are not facts; rather, they are
intentions and expectations relating to our plans, strategies and prospects
under the headings "Prospectus Summary," "Risk Factors" and "Recent
Developments." The forward-looking statements in these sections of the
prospectus can generally be identified by our use of words such as "plan,"
"intend," "believe," "expect," and other words of similar import. Although we
believe that our plans, intentions and expectations reflected in or suggested by
such forward-looking statements are reasonable, we cannot assure you that we
will achieve such plans, intentions or expectations. We urge you to consider
carefully the important factors that could cause actual results to differ
materially from the forward-looking statements. Such factors are described in
the section entitled "Risk Factors" and elsewhere in this prospectus. We make
all the forward-looking statements in this prospectus only as of the date of
this prospectus, and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events.
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus, but
does not contain all the information that may be important to you. This
prospectus includes or incorporates by reference specific terms of the 11 1/2%
Senior Notes due 2006, as well as information regarding our business. We
encourage you to review the detailed information and data appearing elsewhere or
incorporated by reference in this prospectus. Except in discussing our business
and results of operations and where the context requires otherwise, references
in this prospectus to "we," "us," "our," "Waste Systems" or "Company" refer to
Waste Systems International, Inc., and not to any of our subsidiaries.
In this prospectus, we use various terms to describe our 11 1/2% Senior
Notes due 2006, as follows:
o "Old Senior Notes"
refers to the $100,000,000 aggregate principal amount of 11 1/2%
Senior Notes due 2006 originally issued on March 2, 1999 and currently
outstanding.
o "Offered Senior Notes"
refers to the $22,500,000 aggregate principal amount of Old Senior
Notes offered for resale by the selling noteholder by means of this
prospectus.
o "New Senior Notes"
refers to the up to $77,500,000 aggregate principal amount of 11 1/2%
Series B Senior Notes due 2006 to be issued in the exchange offer relating
to the Old Senior Notes, which is described in this prospectus summary
under the heading entitled "The Exchange Offer For $77,500,000 Aggregate
Principal Amount of Old Senior Notes." The New Senior Notes will be
registered under the Securities Act of 1933 but otherwise have
substantially identical terms as the Old Senior Notes and will be treated
with the Old Senior Notes as a single class under the indenture.
o "Senior Notes"
refers to the Old Senior Notes and the New Senior Notes, collectively.
THE OFFERED SENIOR NOTES
On March 2, 1999, we completed the private offering and sale of
$100,000,000 principal amount of Old Senior Notes and warrants to purchase an
aggregate of 1,500,000 shares of common stock, subject to adjustment, to the
initial purchaser, First Albany Corporation. The Old Senior Notes are, and,
immediately after the exchange offer is completed, the New Senior Notes will be,
guaranteed by all of our current subsidiaries.
At the time of that private sale, Waste Systems and the subsidiary
guarantors of the Old Senior Notes entered into a registration rights agreement
with the initial purchaser relating to the registration of the Old Senior Notes
with the Securities and Exchange Commission. In that agreement, we agreed to
deliver to the holders of Old Senior Notes either (a) an exchange offer
prospectus, by which we would offer to exchange the Old Senior Notes of eligible
holders for New Senior Notes, or (b) this prospectus, by which the holders of
Old Senior Notes not eligible to participate in the exchange offer described in
clause (a) above may publicly resell their Old Senior Notes.
It is our understanding that, under current interpretations by the
Securities and Exchange Commission of applicable provisions of the Securities
Act of 1933, "affiliates" of an issuer of securities are not eligible to
participate in exchange offers of the type we are currently conducting for the
other holders of Old Senior Notes. Since the selling noteholder named in this
prospectus is an affiliate of Waste Systems for purposes of the federal
securities laws, it is not eligible to participate in the exchange offer.
Accordingly, we
61
are performing our obligation to file this prospectus, by which the holders of
Old Senior Notes that are not eligible to participate in the exchange offer for
New Senior Notes may publicly resell their Old Senior Notes.
In the registration rights agreement, we agreed to file this prospectus
as promptly as practicable. We also agreed: (a) to cause the registration
statement to be declared effective by the Securities and Exchange Commission on
or before October 28, 1999; and (b) to keep the registration statement of which
this prospectus is a part effective until the earlier of (1) the date that
holders of the Old Senior Notes can sell their notes pursuant to Rule 144 under
the Securities Act without any limitations under clauses (c), (e), (f) and (h)
of Rule 144 and (2) March 2, 2000. If we fail to meet either of those
obligations, we must increase the then-current interest rate payable on all
outstanding Old Senior Notes by 0.50% per annum until the registration statement
is declared effective.
You should read the discussion under the heading "Summary of Terms of
the Senior Notes" and "Description of Senior Notes" for further information
regarding the Senior Notes and our obligations under the registration rights
agreement.
THE EXCHANGE OFFER FOR $77,500,000 AGGREGATE PRINCIPAL AMOUNT
OF OLD SENIOR NOTES
In the registration rights agreement entered into in conjunction with
the March 2, 1999 private offering, we agreed to exchange New Senior Notes for
Old Senior Notes on or before October 28, 1999. On July 14, 1999, we commenced
the exchange offer for an aggregate of $77,500,000 principal amount of Old
Senior Notes for New Senior Notes that are registered under the Securities Act,
and otherwise have substantially identical terms as the Old Senior Notes. Any
Old Senior Notes, including the Offered Senior Notes, that remain outstanding
and not exchanged after the consummation of the exchange offer will be treated
as a single class under the indenture with the New Senior Notes issued in the
exchange offer. We expect to close the exchange offer on or about August 13,
1999.
In the registration rights agreement, we also agreed (1) to keep the
exchange offer registration statement effective until the exchange offer is
completed and (2) to complete the exchange offer on or before October 28, 1999.
Under the agreement, if we fail to meet either of those obligations, we must
increase the then-current interest rate payable on all outstanding Old Senior
Notes by 0.50% per annum until the exchange offer registration statement is
again effective or the exchange offer is completed, as applicable.
THE COMPANY
We are an integrated non-hazardous solid waste management company that
provides waste collection, recycling, transfer and disposal services to
commercial, industrial, residential and municipal customers within some regional
markets in the Northeast and mid-Atlantic states where we operate. We are
achieving significant growth by implementing an active acquisition strategy, and
plan to contribute to our growth by generating increased sales from existing
operations and achieving greater operating efficiencies. Waste Systems is a
Delaware corporation. Our principal executive offices are located at 420 Bedford
Street, Suite 300, Lexington, Massachusetts 02420, and our telephone number is
(781) 862-3000.
Current Integrated Operations
We currently operate, and intend to expand, regional networks of
integrated waste collection and disposal operations. These integrated networks
consist of operating landfills, waste transfer stations, and waste collection
operations.
o Waste Collection Operations
We own multiple waste collection operating subsidiaries which serve as
conduits of waste flow to our transfer stations and landfill operations. As of
June 9, 1999, our waste collection operations serve a total of approximately
72,000 commercial, industrial, residential and municipal customers in the
Vermont, Central Pennsylvania, Upstate New York and Central Massachusetts
markets. Since then, we have acquired an additional waste collection and
transfer station operation servicing the Baltimore, Maryland and Washington D.C.
region, and completed the acquisition of established waste collection and
transfer station operations in Southern New Hampshire and Eastern Massachusetts.
o Landfill Operations
We currently own four landfills, one in Vermont and three in central
Pennsylvania. Two of these were operating in 1998, and generated approximately
20% of our 1998 revenues. Of the remaining two, one began operating in March
1999 with the acquisition of Community Refuse Service, Inc. and we expect to
begin operating the other in the fourth quarter of 1999. The aggregate remaining
estimated permitted capacity of our four owned landfills is approximately 24
million cubic yards. In addition, we have a 16-year contract with the Town of
South Hadley, Massachusetts to operate that town's landfill, subject to receipt
of required permits, which we expect to begin operating in the first quarter of
2000. The South Hadley landfill has an estimated capacity of 2.0 million cubic
yards available for future disposal.
o Transfer Station Operations
We provide transfer station services supporting one of our landfills
and have acquired another transfer station that is permitted and has begun
construction. We recently completed the acquisition of an operation that
provides both waste collection and transfer station services. We have also
recently completed, the acquisition of two additional transfer stations. The
transfer stations serve as gateways of waste streams by receiving and compacting
solid waste collected by us and by third parties, which we then transfer by
long-haul trucks for disposal at landfills we operate.
The Movement of the Solid Waste Management Industry Toward Consolidation and
Integration
The solid waste management industry is undergoing general trends toward
significant consolidation and integration. We believe these trends are due
primarily to the following factors:
o stringent environmental regulations which require increased capital to
maintain regulatory compliance;
o the inability of many smaller operators to achieve the competitive
economies of scale enjoyed by larger operators;
o the competitive and economic benefits of providing integrated collection,
recycling, transfer and disposal services; and
o the privatization of solid waste landfills, transfer stations, and
collection services by municipalities.
Although significant consolidation has occurred within the solid waste
management industry, we believe the industry remains highly fragmented and that
a substantial number of potential acquisition and privatization opportunities
remain, including in the Northeast and Mid-Atlantic states where we operate.
Our Strategy to Capitalize on Industry Consolidation and Integration
We seek to acquire independent collection, transfer station and
landfill operations in appropriate locales to integrate those acquisitions into
our current operations. Our objective is to expand the geographic scope of our
operations and to become one of the leading non-hazardous solid waste management
companies in each local market that we serve. The primary elements of our
strategy for achieving these objectives are:
o Executing our acquisition program. Our acquisition program
consists of identifying regional markets and acquiring
non-hazardous solid waste disposal assets in those targeted
markets that we can operate as part of a fully integrated
solid waste management operation. To establish ourselves
within a selected market, we seek acquisitions that are
consistent with our plan to acquire long-term disposal
capacity in targeted regional markets, collection companies
and transfer stations in the targeted regions to secure a
stable long-term waste flow, and small but complementary
"tuck-in" collection companies to increase a regional
operation's profitability.
o Generating internal growth. We plan to generate internal
growth from existing operations by increasing sales
penetration in our current and adjacent markets, soliciting
new commercial, industrial and residential customers,
marketing upgraded services to existing customers and, where
appropriate, raising prices.
o Increasing operating efficiency. We expect to increase our
operating efficiency through implementation of an
organizational system that sets operating standards and
measures and analyzes operating criteria of our collection,
transfer, disposal and other services.
In connection with our growth strategy, Waste Systems currently is and
at any given time will be involved in potential acquisitions that are in various
stages of exploration and negotiation, ranging from initial discussions to the
execution of letters of intent and the preparation of definitive agreements.
Some of these potential acquisitions may be material. No assurance can be given,
however, that we will be successful in completing further acquisitions in
accordance with our growth strategy, or that acquisitions, if completed, will be
successful. For a description of the risks involved in our growth strategy,
please refer to the subsections of the "Risk Factors" section of this prospectus
on page 13 beginning with "We have no control over many factors in our ability
to finance planned growth".
Our Key Strengths
Through the implementation of our growth strategy, we believe we
demonstrate the following key strengths:
o Development of Fully Integrated Operations
During 1998, over 95% of the solid waste from our Vermont operations
was delivered for disposal at our Moretown, Vermont landfill, and approximately
40% of the solid waste delivered for disposal at the Moretown landfill during
this period was collected by us. We continue to develop more fully integrated
operations in our targeted market areas. During 1998, approximately 59% of the
solid waste from our central Pennsylvania operations was delivered for disposal
at the Sandy Run landfill in Hopewell, Pennsylvania, and approximately 60% of
the solid waste delivered for disposal at the Sandy Run landfill during this
period was collected by us. We expect to begin integration of our waste
collection operations and transfer station services in central Massachusetts
once the South Hadley landfill is operational. We recently acquired our upstate
New York waste collection and transfer station operations in anticipation of
landfill privatization opportunities in that market area.
o Operating Efficiencies
We are achieving significant operating efficiencies and reducing costs
through consolidation and elimination of redundant corporate and service
functions in acquired businesses.
o Significant Disposal Capacity
We have approximately 26.0 million cubic yards of landfill capacity in
landfills we own or operate, of which 9.9 million cubic yards are fully
permitted and operating. We recently began construction on an additional 14.2
million cubic yards of landfill capacity, and 2.0 million cubic yards are
engaged in the final permitting process. This significant disposal capacity
gives us the opportunity to achieve a high degree of integration by allowing
room for disposal of the waste streams generated by our growing collection and
transfer operations.
o Successful Acquiror and Consolidator
We believe that we have demonstrated our ability to realize value in
the fragmented solid waste management industry by completing acquisitions of
three landfills, five transfer stations, and 41 solid waste collection
operations in the Northeast and Mid-Atlantic regions since January 1998. Please
see the section of this prospectus entitled "Recent Developments" beginning on
page [19] for a more complete description of our current activities. We have
been effective in executing our acquisition program to expand our solid waste
assets in our targeted regional markets at prices we believe will provide
opportunities for increased profits and flexibility in operations.
As a result of executing our acquisition program, we have realized
significant growth in revenue and earnings before interest, taxes, depreciation
and amortization or EBITDA, which we believe is a measure commonly used by
lenders and some investors to evaluate a company's performance in our industry.
o Strong Management Team
Our management team has a demonstrated track record of identifying,
acquiring, integrating and operating non-hazardous solid waste disposal assets.
Our executives and operation managers average 13.2 years of experience in the
solid waste disposal industry. In addition, senior management owns a significant
equity stake in Waste Systems, which motivates them to achieve our objectives to
maximize the value of their Waste Systems's stock.
SUMMARY OF TERMS OF THE SENIOR NOTES
Original Issuance.........................
$100,000,000 aggregate principal amount of 11 1/2% Senior Notes due
2006.
Securities Offered by this Prospectus.....
$22,500,000 aggregate principal amount of 11 1/2% Senior Notes due
2006 of Waste Systems.
Maturity Date.............................
January 15, 2006.
Interest Rate.............................
The Senior Notes accrue interest at the rate of 11 1/2% per annum.
Liquidated Damages........................
We must increase the interest rate payable on the Old Senior Notes to
0.50% per annum higher than the then-current rate of interest if:
o the Securities and Exchange Commission has not declared the
registration statement of which this prospectus forms a part effective
on or before October 28, 1999;
o the registration statement of which this prospectus forms a part
fails to be effective under the Securities Act, subject to some limited
exceptions, on or before the earlier of (1) the date that holders may
resell the Offered Senior Notes pursuant to Rule 144 under the Securities
Act without limitations under clauses (c), (e), (f) and (h) of Rule 144 or
(2) March 2, 2001;
o we have not completed the exchange offer on or before October 28,1999; or
o we fail in our obligations to (1) file a registration statement
relating to the 1,500,000 warrants originally issued in conjunction with
the Old Senior Notes and the common stock issuable upon conversion of the
warrants or (2) to have that registration statement declared effective
and/or remain effective, in each case within the time periods specified in
the warrant registration rights agreement.
Changes in Interest Rate..................
We must increase the interest rate per annum payable on the Senior
Notes if we do not achieve an Adjusted Stockholders' Equity, as defined
below, of at least $40 million by the dates in the column below, to the
interest rate per annum in the corresponding column.
Date Interest Rate
December 31, 1999 13%
June 30, 2000 14%
December 31, 2000 15%
"Adjusted Stockholders' Equity" means our stockholders' equity as
shown on our consolidated balance sheets filed as part of our regular
reports with the Securities and Exchange Commission, less the amount of any
increase therein resulting from the issuance of shares of common stock in
exchange for outstanding 7% Convertible Subordinated Notes due 2005 of
Waste Systems, to the extent, if any, that the issuance exceeds 2,343,646
shares of common stock in the aggregate.
Each Senior Note will cease to bear interest from the maturity date or
any redemption date unless, upon due presentation, payment of principal is
improperly withheld or refused. In the event of improper nonpayment, the
relevant Senior Note shall continue to bear interest at the rate of 11 1/2%
per year until the date on which all sums due in respect of the Senior Note
up to that date are received by or on behalf of the relevant holder.
Interest Payment Dates
We will pay interest on the Senior Notes semi-annually in arrears on
July 15, to holders of record as of July 1, and January 15, to holders of
record as of January 1, of each year, commencing July 15, 1999 until
maturity. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Payment Procedures......................
The principal of, premium, if any, and interest on the Senior Notes
will be payable, and the Senior Notes may be exchanged or transferred at
the office or agency of Waste Systems maintained for the purpose in the
Borough of Manhattan, The City of New York. Initially, the office or agency
will be the corporate trust office of IBJ Whitehall Bank & Trust Company,
the trustee of the Senior Notes, located at One State Street, New York, New
York 10004. Principal and interest will be payable at the office of the
trustee but, at our option, interest may be paid by check mailed to the
registered holders at their registered addresses or by wire transfer to
accounts specified by them. No service charge will be made for any
registration of transfer or exchange of the Senior Notes, but we may
require payment of a sum sufficient to cover any transfer tax or other
similar governmental charge payable in connection with the registration.
Subject to applicable law, the trustee and the paying agents shall pay
to Waste Systems upon written request any monies held by them for the
payment of principal or interest that remains unclaimed for two years, and,
after two years, holders entitled to such monies must look to Waste Systems
for payment as general creditors.
Ranking.................................
The Senior Notes and the subsidiary guarantees:
o are senior unsecured obligations of Waste Systems;
o rank equally in right of payment with all other existing and future
senior unsecured obligations of Waste Systems and the subsidiary
guarantors, including the New Senior Notes; and
o are effectively subordinated to all of Waste Systems's and our
subsidiary guarantors' secured debt, including amounts outstanding
under any credit facility and capital lease obligations, to the extent
of the value of the assets securing that debt.
Subsidiary Guarantees...................
The Senior Notes are guaranteed on a senior unsecured basis by all of
our current subsidiaries, which are wholly owned by Waste Systems and which
conduct substantially all of the operations of our business. The subsidiary
guarantees are joint and several obligations of the subsidiary guarantors.
All of our subsidiary guarantors are considered restricted subsidiaries
under the indenture. The indenture permits Waste Systems, in some
circumstances, to establish "unrestricted subsidiaries" which will not
guarantee the Senior Notes.
Optional Redemption.....................
We may not redeem the Senior Notes before March 2, 2003. After March
2, 2003, we may redeem the Senior Notes, in whole or in part, at any time
at the redemption price described in this prospectus under the heading
"Description of Senior Notes-Redemption," together with accrued and unpaid
interest, if any, to the date of redemption.
We may also purchase Senior Notes in the open market or otherwise at
any price.
Change of Control.......................
Upon the occurrence of an event considered a "change of control" of
Waste Systems, you will have the right to sell back to us all of your
Senior Notes at a price equal to 101% of the aggregate principal amount,
together with accrued and unpaid interest, if any, to the date of sale.
Please refer to the section in the prospectus entitled "Description of
Senior Notes-Change of Control."
Certain Covenants.......................
The indenture under which the Old Senior Notes have been issued and
the New Senior Notes will be issued limits our ability and the ability of
our subsidiary guarantors to, among other things:
o incur additional indebtedness;
o pay dividends on or redeem our capital stock;
o issue capital stock of our subsidiaries;
o make investments;
o create liens;
o issue guarantees;
o engage in transactions with affiliates;
o sell assets; and
o conduct certain mergers and consolidations.
All of the limitations and prohibitions described above, as well as
the other limitations and prohibitions applicable under the indenture, are
subject to a number of important qualifications and exceptions. Please
refer to the sections in this prospectus entitled "Description of Senior
Notes-Certain Covenants."
Form and Denomination...................
The Senior Notes are in registered form without coupons, in
denominations of $10,000. The Senior Notes are represented by one or more
permanent global securities in bearer form deposited on behalf of The
Depository Trust Company with IBJ Whitehall Bank & Trust Company, as
custodian. You will not receive the Senior Notes in registered form unless
one of the events described in the section of this prospectus entitled
"Book Entry; Delivery and Form" occurs. Instead, beneficial interests in
the Senior Notes will be shown on, and transfers of these will be effected
only through, records maintained in book-entry form by The Depository Trust
Company for its participants.
Absence of a Public Market for the Offered Senior Notes......
The Senior Notes are currently eligible for trading in the Private
Offering, Resales and Trading through Automated Linkages or "PORTAL"
market. After purchase, you may continue to trade the Senior Notes in the
PORTAL market. We do not intend to register the Offered Senior Notes or any
other Senior Notes on any securities exchange.
The Indenture...........................
The Offered Senior Notes and the New Senior Notes will be treated as a
single class under the indenture.
Risk Factors
You should consider carefully all of the information set forth in this
prospectus and the specific factors set forth under the "Risk Factors" section
beginning on page 10 before deciding to invest in the securities being offered
in this prospectus.
RISK FACTORS
You should carefully consider the following risks in addition to the
other information and data set forth in this prospectus before purchasing the
Offered Senior Notes. The risk factors described below are applicable to the
Offered Senior Notes as well as the New Senior Notes.
The trading price for the Senior Notes may be volatileThe trading price for the
Senior Notes may be volatile.
The trading price of the Senior Notes could be subject to significant
fluctuations in response to changes in our prospects and financial condition. In
addition, factors such as announcements of fluctuations in our competitors'
operating results, changes in interest rates and general market conditions could
have a significant impact on the future trading prices of the Senior Notes. Any
of these factors may have an adverse effect on the level and stability of the
trading prices of the Senior Notes. Historically, the market for non-investment
grade debt, such as the Senior Notes, has been subject to disruptions that have
caused substantial volatility in the prices of non-investment grade debt.
Payment of principal and interest on the Senior Notes is subordinated to our
secured debt and our subsidiaries' secured debtPayment of principal and interest
on the Senior Notes is subordinated to our secured debt and our subsidiaries'
secured debt.
The Senior Notes are senior unsecured obligations of Waste Systems and
the subsidiary guarantors, and rank equal in right of payment with all other
existing and future senior unsecured indebtedness of Waste Systems and the
subsidiary guarantors. As unsecured obligations, however, the Senior Notes are
effectively subordinated to all of Waste Systems's and our subsidiaries' secured
debt, including loans outstanding under any bank credit facility, our capital
lease obligations and all liabilities, including trade payables, of our
subsidiaries that do not guarantee the Senior Notes. Currently all of our
subsidiaries guarantee the Senior Notes, but the indenture permits subsidiary
guarantors to be released from the guarantees in some circumstances and permits
Waste Systems to establish, in some circumstances, new subsidiaries that have no
obligation to guarantee the Senior Notes. Please refer to the section of this
prospectus entitled "Description of Senior Notes--Subsidiary Guarantees" for a
detailed discussion of the subsidiary guarantees.
In the event of a bankruptcy, liquidation, dissolution, reorganization
or similar proceeding of Waste Systems, the assets of Waste Systems will be
available to satisfy obligations of our and our subsidiaries' secured debt
before any payment may be made on the Senior Notes. In addition, to the extent
the secured assets cannot fully satisfy the secured indebtedness, the secured
creditors would have a claim for any shortfall that would rank equal in right of
payment with the Senior Notes.
A court may declare the subsidiary guarantees void, subordinated or take other
actions detrimental to youA court may declare the subsidiary guarantees void,
subordinated or take other actions detrimental to you.
Various fraudulent conveyance laws enacted for the protection of
creditors may apply to the subsidiary guarantors' issuance of the subsidiary
guarantees. A court may void or subordinate a subsidiary guarantee if it were to
find that:
o the subsidiary guarantor incurred the guarantee with the intent to hinder,
delay or defraud any present or future creditor;
o the subsidiary guarantor contemplated insolvency with a design to prefer
one or more creditors to the exclusion in whole or in part of others; or
o the subsidiary guarantor
(1) did not receive fair consideration or reasonably equivalent value for
issuing its subsidiary guarantee; and
(2) at the time the subsidiary guarantee was issued,
- was insolvent or rendered insolvent by the issuance of the
subsidiary guarantee;
- was engaged or about to engage in a business or transaction for
which its remaining assets constituted unreasonably small capital
to carry on its business; or
- intended to incur, or believed that it would incur, debts beyond
its ability to pay them as they matured.
If this happened, your claims as a holder of the Senior Notes against
the issuer of an invalid subsidiary guarantee would be subordinated to the prior
payment of all liabilities, including trade payables, of the subsidiary
guarantor.
A court's method for determining insolvency for purposes of the above
considerations will vary depending upon the law applied in each case. In most
cases, however, a court may find a subsidiary guarantor insolvent if the sum of
its debts, including contingent liabilities, is greater than the fair value of
all of its assets or if the amount required to pay its probable liability on its
existing debts, as they mature, is greater than the present fair saleable value
of its assets.
We cannot assure you, however, that a court passing on these issues
will find that the subsidiary guarantees were not fraudulent conveyances. Please
refer to the section in this prospectus entitled "Description of Senior
Notes--Subsidiary Guarantees" for further discussion of this important issue.
We may be unable to meet our obligations to repurchase the
Senior Notes upon a change of control.
In the event of a change of control of Waste Systems, the indenture
requires us to make an offer to repurchase all outstanding Senior Notes at a
price equal to 101% of their principal amount, plus accrued and unpaid interest
to the date of repurchase. However, if a change of control occurs, we cannot
assure you that we will have the sufficient funds available to make any required
repurchases of the Senior Notes, or that restrictions in our other indebtedness
will allow us to make any required repurchases. Please refer to the section in
this prospectus entitled "Description of Senior Notes--Change of Control" for a
more detailed description of the events constituting a change of control under
the Senior Notes indenture.
Our history of losses make the Senior Notes a highly speculative investment.
From Waste Systems's inception through March 31, 1999, we have had
aggregate net losses of approximately $43.9 million on aggregate revenues of
approximately $36.2 million and had an accumulated loss from operations of $26.0
million. Following Waste Systems's restructuring in 1996, we directed our focus
on becoming an integrated solid waste management company by implementing a
business strategy based on aggressive growth through acquisitions. Our ability
to become profitable and to maintain profitability as we pursue our business
strategy will depend upon several factors, including our ability to:
o execute our acquisition strategy and expand our revenue generating
operations while maintaining or reducing our proportionate administrative
expenses;
o locate sufficient financing to fund acquisitions; and
o adapt to changing conditions in the competitive market in which we operate.
External factors, such as the economic and regulatory environments in which we
operate will also have an effect on our business and its profitability. However,
continued losses and negative cash flow may not only prevent us from achieving
our strategic objectives, it may also limit our ability to meet financial
obligations, including our obligations under the Senior Notes.
Our high level of indebtedness could adversely affect our financial health.
We currently have a high level of indebtedness relative to
stockholders' equity. The following table illustrates our level of indebtedness:
As of March 31, 1999
(dollars in thousands)
Long-term indebtedness............... $152,057
Stockholders' equity................. $5,892
Debt to equity ratio................. 25.7:1
Our high level of indebtedness could:
o limit our flexibility in planning for, or reacting to, changes in
business, industry and economic conditions;
o require us to dedicate a substantial portion of our cash flow from
operations to repaying indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;
o place us at a competitive disadvantage compared to our competitors
with lower levels of indebtedness; and
o limit our ability to borrow additional funds, either because of
restrictive covenants in the Senior Notes indenture or because of a
potential lender's limits on borrower indebtedness.
Our high level of indebtedness may have a direct negative impact on our
operations. It may also result in an event of default under our debt instruments
which, if not cured or waived, could have a material adverse effect on our
finances.
For the three
months ended For the Years Ended
March 31, December 31,
1999 1998 1997
---- ---- ----
Ratio of Earnings to
Fixed Charges.............. N/A N/A N/A
For the three months ended March 31, 1999, we incurred net losses that
did not cover fixed charges by approximately $8.8 million; for the year ended
December 31, 1998, we incurred net losses that did not cover fixed charges by
approximately $6.6 million; and for the year ended December 31, 1997, we
incurred net losses that did not cover fixed charges by approximately $5.5
million. For purposes of computing this financial relationship of earnings to
fixed charges, earnings consist of pretax income (loss) from continuing
operations plus fixed charges. Fixed charges consist of interest expense and
financing costs, including capitalized interest and amortization of deferred
financing costs, and an estimated portion of rentals representing interest
costs.
Incurring more debt could further exacerbate the risks of our high level of
indebtedness.
Despite our current high level of indebtedness, the indenture does not
fully prohibit us or our subsidiaries from incurring substantial additional
indebtedness in the future. We may increase our level of indebtedness by
obtaining additional bank financing. Borrowings and other indebtedness which
Waste Systems or our subsidiaries may incur may be secured and therefore would
rank senior to the Senior Notes and the subsidiary guarantees. If new debt is
added to our current level of debt, the related risks of indebtedness could
intensify both for us and for the holders of the Senior Notes.
We may not generate enough cash to service our indebtedness or our other
liquidity needs
Our ability to make payments on and to refinance our indebtedness,
including the Senior Notes, and to fund planned capital expenditures will depend
on our ability to generate cash in the future. This ability depends in part on
our operating performance and the execution of our business strategy. It is also
subject to influence by general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash
flow from operations, that we will realize anticipated cost savings from
operating efficiency improvements, or that we will be able to obtain future
financing in amounts sufficient to enable us to pay our indebtedness, including
the Senior Notes, or to fund our other liquidity needs.
The following table outlines the schedule of our required debt
amortization payments:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at Total
March 31, Principal Payments Due During
1999 1999 2000 2001 2002 2003 2004 2005 2006 Remainder Total
---- ---- ---- ---- ---- ---- ---- ---- ---- --------- -----
(dollars in thousands)
Long-Term Debt:
Bank credit facility $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Capital leases, equipment
and other notes payable 2,106 216 281 306 334 282 139 153 169 226 2,106
Senior Notes 100,000 - - - - - - - 100,000 - 100,000
10% convertible
subordinated debentures 400 - 400 - - - - - - - 400
7% convertible
subordinated notes 49,551 - - - - - - 49,551 - - 49,551
------------------ -------- ---- ----- ---- ---- ----- ---- ------- -------- ----- --------
Total $152,057 $216 $ 681 $306 $334 $ 282 $139 $49,704 $100,169 $ 226 $152,057
======== ==== ===== ==== ==== ===== ==== ======= ======== ===== ========
</TABLE>
We may need to refinance all or a portion of our indebtedness,
including the Senior Notes, on or before maturity. We cannot assure you that we
will be able to refinance any of our indebtedness, including the Senior Notes,
on commercially reasonable terms or at all.
We have no control over many factors in our ability to finance planned growth.
We require substantial funds to complete and bring to commercial
viability all of our currently planned projects. We also anticipate that future
business acquisitions will be financed not only through cash from operations and
the proceeds from the Old Senior Notes offering, but also by future borrowings
under bank credit facilities, offerings of Waste Systems stock as consideration
for acquisitions, or from the proceeds of additional equity or debt financings.
Therefore, our ability to satisfy our future capital and operating requirements
for planned growth is dependent on a number of pending or future financing
activities, and we cannot assure you that any of these financing activities will
be successfully completed.
Our future success depends upon our ability to manage rapid growth in operations
and personnel.
Our objective is to continue to grow by expanding our services in
selected markets where we can be one of the largest and most profitable
fully-integrated solid waste management companies. Accordingly, we may
experience periods of substantial rapid growth. This growth could place a
significant strain on our operational, financial and other resources. Any
failure to expand our operational and financial systems and controls in an
efficient manner at a pace consistent with our growth could have a material
adverse effect on our business, financial condition and results of operations.
Our future success is also highly dependent upon our continuing ability
to identify, hire, train and motivate a sufficient number of highly qualified
personnel for our planned growth. We face competition for recruiting qualified
personnel from our competitors, other companies not in the waste management
industry, government entities and other organizations. We cannot assure you that
we will be successful in attracting and retaining qualified personnel as
required for our present and future planned operations. Our inability to attract
and retain a sufficient number of qualified personnel could have a material
negative impact on our business, financial condition and results of operations.
Our future success depends upon our ability to identify, acquire and integrate
acquisition targets.
Our future success is highly dependent upon our continued ability to
successfully identify, acquire and integrate additional solid waste collection,
recycling, transfer and disposal businesses. As the solid waste management
industry continues to consolidate, competition for acquisition candidates within
the industry increases and the availability of suitable candidates on terms
favorable to us may decrease. We compete for acquisition candidates with larger,
more established companies that may have significantly greater capital resources
than we do, which can further decrease the availability of suitable acquisition
candidates at prices affordable to us. We cannot assure you that we will be able
to identify suitable acquisition candidates, to successfully negotiate
acquisitions on terms reasonable to us given our resources, to obtain financing
for those targets on favorable terms, or to successfully integrate any acquired
targets with our current operations.
We believe that a significant factor in our ability to consummate
acquisitions will be the attractiveness of our common stock as consideration for
potential acquisition targets. This attractiveness may be, in large part,
dependent upon the relative market price and capital prospects of our equity
securities as compared to the equity securities of our competitors. Our stock is
traded on the Nasdaq Stock Market, Inc.'s SmallCap Market, while some of our
competitors' stock is traded on larger, more recognized markets. In addition,
some of our competitors have a significantly larger capitalization than we do,
which generally results in a more liquid market for their publicly traded
securities. If the market price of our common stock were to decline, we might be
unable to use our common stock as consideration for future acquisitions.
Loss of key executives could affect Waste Systems's ability to achieve Waste
Systems's business objectives.
We depend to a high degree on the services of Philip Strauss, Chairman,
Chief Executive Officer and President, and Robert Rivkin, Director, Executive
Vice President--Acquisitions, Chief Financial Officer, Secretary and Treasurer,
in planning to achieve our business objectives. We have obtained $1 million key
executive insurance policies for each of Messrs. Strauss and Rivkin. However, if
we lost the services of either of these executives, our business, financial
condition and results of operations could suffer material adverse effects.
Failed acquisitions or projects may adversely affect our results of operations
and financial condition.
In accordance with generally accepted accounting principles, we record
some expenditures and advances relating to acquisitions, pending acquisitions
and landfill projects as assets on our balance sheet, then amortize or
depreciate these capitalized expenditures and advances over time, usually
matching an asset's depreciation against the revenues it generates. We also have
an accounting policy to record as an expense in the current accounting period
all unamortized capital expenditures and advances relating to any operation that
is permanently shut down, any acquisition that will not be consummated, and any
landfill project that is terminated. As a result of these accounting practices,
we may have to record the entire capitalized expenditure of any failed
acquisition or terminated project as a charge against earnings in the accounting
period in which the failure or termination occurs. A large, unexpected expense
against typical earnings could have a material adverse effect on our results of
operations, financial condition and our business.
Our business may not succeed due to the highly competitive nature of the solid
waste management industry.
The solid waste management industry is highly competitive and very
fragmented, and requires substantial labor and capital resources. Competition
exists for collection, recycling, transfer and disposal service customers, as
well as for acquisition targets. The markets we compete in or are likely to
compete in usually are served by one or more national, regional or local solid
waste companies that may have a respected market presence, and that may have
greater financial, marketing or technical resources than those available to us.
Competition for waste collection and disposal business is based on price, the
quality of service and geographical location. From time to time, competitors may
reduce the price of their services in an effort to expand or maintain market
share or to win competitively bid contracts.
We also compete with counties, municipalities and operators of
alternative disposal facilities that operate their own waste collection and
disposal facilities. The availability of user fees, charges or tax revenues and
the availability of tax-exempt financing may provide a competitive advantage to
public sector competitors in solid waste management. Additionally, alternative
disposal facilities such as recycling and incineration may reduce the demand for
the landfill-based solid waste disposal services that we provide and on which
our strategy is based. We cannot assure you that we will be able to remain
competitive with our larger and better capitalized private competitors or with
tax-advantaged public sector operators.
Seasonal revenue fluctuations may negatively impact our operations.
Our revenues and results of operations tend to vary seasonally. We tend
to have lower revenues in the winter months of the fourth and first quarters of
the calendar year than in the warmer months of the second and third quarters.
The primary reasons for lower revenues in the winter months include:
o harsh winter weather conditions may interfere with collection and
transportation activities;
o the volume of winter month waste in our operating regions is generally
lower than that which occurs in warmer months; and
o the construction and demolition activities which generate landfill
waste are primarily performed in the warmer seasons.
We believe that the seasonality of the revenue stream will not have a material
adverse effect on our business, financial condition and results of operations on
an annualized basis. Still, higher warm weather revenues may not offset lower
cold season revenues, and seasonal revenue fluctuations may make it more
difficult to manage and finance our business successfully.
The geographic concentration of our operations magnifies the risks to our
success.
Waste Systems has established solid waste management operations in
Central Pennsylvania, Vermont, Upstate New York and Central Massachusetts. Since
our current primary source of revenues will be concentrated in these geographic
locations, our business, financial condition and results of operations could be
materially affected by downturns in these local economies, severe weather
conditions in these regions, and Pennsylvania, Vermont, New York and
Massachusetts state and local regulations. Factors that have a greater impact on
our selected markets than on other regions of the country are more likely to
have a negative effect on our business than on our larger regional and national
competitors in the waste management industry.
Industry consolidation in our operating regions has also increased the
competition for customers who generate waste streams. This may make it
increasingly difficult to expand operations within our selected markets. We
cannot assure you that we will be able to continue to increase the local waste
streams to our operating landfills or be able to expand our geographic markets
to mitigate the effects of adverse economic events that may occur in these
regions. As a result of our geographic concentration, we are exposed to a higher
degree of risks than our geographically more diverse competitors.
Potential difficulties in acquiring landfill capacity could increase our
costs.
Our operations depend on our ability to expand the landfills we own or
operate and to develop or acquire new landfill sites. We cannot assure you that
we will be successful in obtaining new landfill sites or expanding the permitted
capacity of our existing landfills. The process of obtaining required permits
and approvals to open new landfills, and to operate and expand existing
landfills has become increasingly difficult and expensive. The process can take
several years and involves hearings and compliance with zoning, environmental
and other requirements. We cannot assure you that we will be successful in
obtaining and maintaining required permits to open new landfills or expand the
existing landfills we own or operate.
Even when granted, final permits to expand landfills are often not
approved until the remaining capacity of a landfill is very low. In the event we
exhaust our permitted capacity at one of our landfills, our ability to expand
internally will be limited and we will be required to cap and close that
landfill. Furthermore, as the solid waste management industry continues to
consolidate, there will be greater competition for potential landfill
acquisitions. As a result of insufficient landfill capacity, we could be forced
to transport waste greater distances to our own landfills that have capacity, or
to dispose of waste locally at landfills operated by our competitors. In either
case, the additional costs we would incur could have a material adverse effect
on our business.
Failure to obtain landfill closure performance bonds and letters of credit may
adversely affect our business.
We may be required to post a performance bond, surety bond or letter of
credit to ensure proper closure and post-closure monitoring and maintenance at
some of our landfills and transfer stations. Our failure to obtain performance
bonds, surety bonds or letters of credit in sufficient amounts or at acceptable
rates may have a material adverse effect on our business, financial condition
and results of operations.
Estimated accruals for landfill closure and post-closure costs may not meet our
actual financial obligations.
The closure and post-closure costs of our existing landfills and any
landfill we may own or operate in the future represent material financial
obligations. To meet these future obligations, we estimate and accrue closure
and post-closure costs based on engineering estimates of landfill usage and
remaining landfill capacity. We cannot assure you that the amount of funds
estimated and accrued for landfill closure and post-closure costs will be enough
to meet these future financial obligations. Any failure to meet these
obligations when they become due, or any use of significant funds to cover a gap
between such accruals and actual landfill closure and post-closure costs
incurred, may have a material adverse effect on our business, financial
condition and results of operations.
Environmental and other government regulations impose costs and uncertainty on
our operations.
We and our customers operate in a highly regulated environment, and our
landfill projects in particular usually will require federal, state and local
government permits and environmental approvals. Maintaining awareness of and
attempting to comply with applicable environmental legislation and regulations
require substantial expenditures of our personnel and financial resources. These
efforts, however, do not guarantee that we will meet all of the applicable
regulatory criteria necessary to obtain required permits and approvals.
Government regulators generally have broad discretion to deny, revoke,
or modify regulatory permits or approvals under a wide variety of circumstances.
In addition, government regulators may adopt new environmental legislation or
regulations or amend existing legislation, and may interpret or enforce existing
legislation in new ways. All of these circumstances may require us or our
customers to obtain additional permits or approvals.
Any delay in obtaining required regulatory permits or approvals may
delay our ability to obtain project financing, thereby increasing our need to
invest working capital in projects before obtaining more permanent financing.
These delays may also reduce our project returns by deferring the receipt of
project revenues to a later project completion date. If we are required to
cancel any planned project because we were unable to obtain required permits or
as a result of any other regulatory impediments, we may lose any investment we
have made in the project up to that point. The cancellation, or any substantial
delay in completion, of any project may have a significant negative effect on
our financial condition and results of operations.
We are exposed to potential liability for environmental damage and regulatory
noncompliance.
We are engaged in the collection, transfer and disposal of waste
described as non-hazardous, and we believe that we are currently in material
compliance with all applicable environmental laws. Despite these circumstances,
if harmful substances escape into the environment and cause damages or injuries
as a result of our operating activities, we are exposed to the risk that we will
be held liable for any damages and injuries, as well as for significant fines
for regulatory noncompliance.
Our environmental liability insurance may not cover all risks of loss.
We maintain environmental impairment liability insurance covering
particular claims for the sudden or gradual onset of environmental damage to the
extent of $5 million per landfill. If we were to incur liability for
environmental damage in excess of our insurance limits, our financial condition
could be adversely affected. We also carry a comprehensive general liability
insurance policy, which management considers adequate at this time to protect
our assets and operations from other risks.
Addressing local community concerns about our operations may adversely affect
our business.
Members of the public in the communities where we do business could
raise concerns with government regulators and others about the effects on their
communities of our existing or planned operations and, in some areas, the
proposed development of solid waste facilities. These concerns cannot always be
anticipated, and our attempts to address these concerns may result in unforseen
delays, costs and litigation that could adversely affect our ability to achieve
our business objectives.
Year 2000 problems could have an adverse impact on our business.
We utilize and are dependent upon general accounting and
industry-specific customer information and billing software to conduct our
business that are likely to be affected by the date change in the year 2000.
This purchased software is run on in-house computer networks. In addition,
embedded technology that is contained in a substantial number of our items of
hauling, disposal and communications equipment may be affected by the date
change in the year 2000. We have initiated a review and assessment of all
hardware, software and related technologies to determine whether it will
function properly in the year 2000. We currently believe that costs associated
with the compliance efforts will not have a significant impact on our ongoing
results of operations, although we cannot assure you in this regard. Computer
software and related technologies used by our customers, service providers,
vendors and suppliers are also likely to be affected by the year 2000 date
change. To date, those vendors which have been contacted have indicated that
their hardware or software is or will be year 2000 compliant in time frames that
meet our requirements. We have also initiated communications with our
significant suppliers regarding the year 2000 issue. However, we cannot assure
you that the systems of such suppliers, or of customers, will be year 2000
compliant. Failure by us or any of the parties mentioned above, to properly
process dates for the year 2000 and thereafter could result in unanticipated
expenses and delays to us, including delays in the payment by our customers for
services provided and our ability to make payments on the Senior Notes.
RECENT DEVELOPMENTS
Senior Notes Offering
Senior Notes offering and use of proceeds. On March 2, 1999, we
completed a private placement of $100.0 million principal amount of Old Senior
Notes and warrants to purchase an aggregate of 1,500,000 shares of common stock
at an exercise price of $6.25 per share. Please refer to the sections of this
prospectus entitled "Prospectus Summary--Summary of Terms of the Senior Notes"
and "Description of Senior Notes" for an explanation of the material terms of
the Senior Notes. The net proceeds to Waste Systems from the sale of the Old
Senior Notes and warrants, after deducting the discount to the initial purchaser
and related issuance costs, were approximately $97.3 million. We used a portion
of the proceeds from the offering to repay the $20.0 million of Waste Systems's
13% short term notes due June 30, 1999. The $10.0 million BankNorth Group, N.A.
credit facility and approximately $1.7 million of capital leases and other notes
payable were paid with the proceeds. Also, we redeemed approximately $1.45
million principal amount of Waste Systems's 10% convertible subordinated
debentures due October 6, 2000 and completed several acquisitions as further
described below. A portion of the proceeds has been used for general corporate
purposes. The remainder will be used for possible future acquisitions and/or
working capital.
In connection with the offering of the Old Senior Notes and warrants,
we entered into a registration rights agreement with the initial purchaser. This
registration rights agreement requires us to exchange the Old Senior Notes for
New Senior Notes for eligible holders of Old Senior Notes. We filed an exchange
offer registration statement with the Securities Exchange Commission (File No.
333-81341) that was declared effective on July 31, 1999 and we commenced the
exchange offer on July 14, 1999. We expect to close the exchange of $77,500,000
aggregate principal amount of Old Senior Notes for New Senior Notes by August
13, 1999. Under the registration rights agreement, if we fail to complete the
exchange offer by October 28, 1999, for any reason, we must increase the
interest rate payable on the Old Senior Notes by 0.50% per annum until the
exchange offer is completed.
In addition, the registration rights agreement requires us to register
for resale the Old Senior Notes held by our affiliates or other persons
ineligible to participate in the exchange offer under the interpretations of the
Securities and Exchange Commission of applicable federal securities rules. The
registration statement, of which this prospectus is a part, is intended to
satisfy this obligation. Please see the sections of this prospectus entitled
"Prospectus Summary-The Offered Senior Notes" and "--Summary of Terms of the
Senior Notes" for a more complete description of our obligation to register the
Offered Senior Notes.
When we offered the Old Senior Notes, we also offered warrants to
purchase 1,500,000 shares of common stock. We also entered into a registration
rights agreement with the initial purchaser relating to registration of those
warrants. The warrant registration rights agreement requires us to register for
resale those warrants and any common stock that is issuable upon exercise of the
warrants. Under the warrant registration rights agreement, if we fail to: (a)
file that registration statement on or prior to August 27, 1999; or (b) cause it
to be declared effective by the Securities and Exchange Commission on or prior
to October 28, 1999; or (c) keep the registration statement effective during the
prescribed effective period; the interest rate payable on the Senior Notes will
increase by 0.50% per annum until the registration statement is filed or
declared or made effective, as applicable. Accordingly, we currently intend to
file with the Securities and Exchange Commission a shelf registration statement
to register the warrants and the common stock issued or issuable upon exercise
of the warrants and to cause it to be declared effective prior to the deadlines
described above, and to keep it effective during the prescribed effective
period.
Summary of terms of the warrants. The warrants are exercisable from
September 2, 1999, through March 2, 2004. The number of shares for which, and
the price per share at which, a warrant is exercisable, are subject to
adjustment upon the occurrence of events specified in the warrant agreement.
Exchange of Common Stock for 7% Convertible Subordinated Notes due 2005
On March 31, 1999, Waste Systems completed a private exchange offer in
which we issued a total of 2,244,109 shares of common stock in exchange for
$10,449,000 aggregate principal amount of the outstanding 7% Convertible
Subordinated Notes due May 13, 2005 previously issued in a private placement.
The exchange price per share of $4.656 was equal to the closing price of our
common stock on the Nasdaq SmallCap Market on March 31, 1999. Accrued but unpaid
interest on the notes exchanged was paid in cash. As a result of the private
exchange offer, Waste Systems retired $10,449,000 of its 7% Convertible
Subordinated Notes. The remaining notes are convertible by holders into common
stock at $10.00 per share.
To conduct the private exchange offer, we also entered into exchange
agreements with each of the participating note holders. In each exchange
agreement, we agreed to register for resale the shares of common stock issued in
the private exchange offer, or an aggregate of 2,244,109 shares of common stock.
On August 5, 1999, we filed a shelf registration statement with the Securities
and Exchange Commission to register those shares of common stock (File No.
333-[__________]).
Stock Repurchase
With the proceeds from the private offering of Old Senior Notes, we
repurchased 497,778 shares of our common stock from the Federal Deposit
Insurance Corporation for an aggregate purchase price of approximately $2.8
million.
Acquisitions
From January 1, 1999 to May 1, 1999, we completed ten acquisitions,
consisting of eight collection operations, one transfer station and one
landfill. The aggregate purchase price for these acquisitions was approximately
$42.1 million which was paid in cash and by the assumption of approximately $3
million of debt. These acquisitions have combined annual revenue of
approximately $12.0 million. The acquisitions have all been recorded using the
purchase method of accounting.
On August 3, 1999, we completed the acquisition of the assets of C&J
Trucking, Inc. and affiliates, with collection operations throughout Eastern
Massachusetts and Southern New Hampshire. The acquired assets also include two
transfer stations located in Londonderry, New Hampshire and Lynn, Massachusetts,
which are initially expected to handle in excess of 1,000 tons of waste per day.
On July 6, 1999, we acquired Eastern Trans-Waste of Maryland, Inc., a
well-established commercial and industrial collection operation servicing the
Baltimore, Maryland and Washington, D.C. region. Its operations include a 53,000
square foot transfer station located in Washington, D.C., which is permitted to
operate twenty-four hours per day with no capacity restrictions. As part of its
customer base, Eastern Trans-Waste serves the White House and numerous federal
agencies. The total purchase price for these acquisitions is approximately $70
million, in cash and stock. The consideration paid to former stockholders of
Eastern Trans-Waste of Maryland, Inc. includes 2,678,620 shares of common stock
and 894 shares of newly designated Series C Preferred Stock that is
automatically convertible, upon stockholder approval, into 1,576,292 shares of
common stock, subject to adjustment in the event of a stock dividend,
subdivision or combination of Waste Systems's common stock or a capital
reorganization, merger or consolidation of Waste Systems or the sale of all or
substantially all of Waste Systems's assets. The Series C Preferred Stock has
substantially the same terms as the common stock, other than: (1) a liquidation
preference equal to $11,615 per share, subject to adjustment, and (2) a per
share put right, exercisable in the event that stockholder approval for the
Series C conversion is not obtained by October 30, 1999, equal to the sum of the
liquidation preference amount and interest accrued thereon at 8% per annum from
July 2, 1999 per share. We intend to hold a special meeting of the stockholders
before October 30, 1999 to consider and vote on stockholder approval of the
Series C conversion.
The acquisitions are expected to add annualized revenues of
approximately $30 million and will be recorded using the purchase method of
accounting. As a result, we believe that we are poised to continue our growth in
these areas and to enhance our profitability through the implementation of
operating efficiencies.
New Revolving Credit Facility
On July 22, 1999, we entered into a $25 million revolving credit
facility with BankNorth Group, N.A. to fund acquisitions and for general working
capital purposes. No credit has been drawn to date, but any debt incurred under
this credit facility is secured debt that is guaranteed by our subsidiaries. The
revolving credit agreement has a term of three years, provides for an interest
rate based on LIBOR, and includes other terms and conditions customary for
secured revolving credit facilities.
Private Placement of up to 2,857,143 shares of common stock
On July 30, 1999, we completed an initial closing of a private
placement in which we issued 571,429 shares of common stock for aggregate
consideration of $4 million, and on August 2, 1999, we completed a subsequent
closing of the private placement in which we issued an additional 1 million
shares of common stock for aggregate additional proceeds of $7 million. The
proceeds from the private placement will be used for potential future
acquisitions and general working capital purposes. We anticipate holding
additional subsequent closings under the private placement for the issuance of
an additional 1,285,714 shares, for a total of 2,857,143 shares at a
subscription price of $7 per share, resulting in gross total private placement
proceeds of $20 million. The subscription agreements under which these shares
have been or may be sold obligate us to file a shelf registration statement for
the resale of the shares. Accordingly, we intend to file with the Securities and
Exchange Commission by not later than October 28, 1999 a shelf registration
statement for the resale of these shares, and to cause that registration
statement to become effective on or before January 26, 2000.
DESCRIPTION OF SENIOR NOTES
The following section "Description of Senior Notes" contains certain terms that
are defined in the indenture. We have included the relevant definitions in the
subsection to this section entitled "-- Certain Definitions." The following
section should be read in conjunction with the information provided in the
"Prospectus Summary" section of this prospectus under the heading "Summary of
Terms of the Senior Notes".
Subsidiary Guarantees
Payment of the principal of, premium, if any, and interest on the
Senior Notes, when and as the same become due and payable, will be guaranteed
jointly and severally, on a senior unsecured basis by each of the following
subsidiary guarantors of Waste Systems:
BioSafe Systems, Inc.
Community Refuse Service, Inc.
Mostoller Landfill, Inc.
Palmer Resource Recovery Corp.
WSI Burlington Transfer Station, Inc.
WSI Camden Transfer Station, Inc.
WSI Harrisburg Hauling, Inc.
WSI Hopewell Landfill, Inc.
WSI Maryland Holdings, Inc.
Eastern Trans-Waste of Maryland, Inc.
WSI of Massachusetts Hauling, Inc.
WSI Massachusetts Holdings, Inc.
WSI Massachusetts Recycling, Inc.
WSI Medical Waste Systems Inc.
WSI Moretown Landfill, Inc.
WSI New York Holdings, Inc.
WSI of New York, Inc.
WSI Oxford Transfer Station, Inc.
WSI Pennsylvania Holdings, Inc.
WSI Altoona Hauling, Inc.
WSI Somerset Hauling, Inc.
WSI of South Hadley, Inc.
WSI St. Johnsbury Transfer Station, Inc.
WSI Vermont Holdings, Inc.
WSI of Vermont, Inc.
WSI Waitsfield Transfer Station, Inc.
The obligations of each subsidiary guarantor under its subsidiary guarantee will
be limited so as not to constitute a fraudulent conveyance or fraudulent
transfer under applicable law. Please refer to the "Risk Factors" section of
this prospectus under the heading "--A court may declare the subsidiary
guarantees void, subordinated or take other actions detrimental to you."
The indenture requires that each of Waste Systems's current and future
Restricted Subsidiaries be a subsidiary guarantor. As of the date of this
prospectus, each of the subsidiaries of Waste Systems listed above is a
Restricted Subsidiary. The indenture permits Waste Systems, in certain
circumstances, to establish "Unrestricted Subsidiaries" which do not guarantee
the Senior Notes. Any subsidiary guarantor that is designated an Unrestricted
Subsidiary in accordance with the terms of the indenture shall be free from any
subsidiary guarantee or, if previously a Restricted Subsidiary, released from
and relieved of its obligations under its subsidiary guarantee, according to a
supplemental indenture satisfactory to the trustee.
The indenture provides that no subsidiary guarantor may merge with or
into or consolidate with any other person or convey, sell, assign, transfer,
lease or otherwise dispose of all or substantially all its properties and assets
to any other Person, other than Waste Systems or a Wholly Owned Restricted
Subsidiary, unless (1) immediately after the transaction, and giving effect to
the transaction, no Default or Event of Default has occurred and is continuing;
(2) the transaction was subject to, and consummated in compliance with, as
appropriate, either the covenant described under the caption "--Certain
Covenants--Limitation on Asset Sales" or the covenant described under the
caption "--Merger, Consolidation and Sale of Assets"; and (3) Waste Systems
shall have delivered to the trustee an officers' certificate and an opinion of
counsel, each stating that the transaction complies with the above provisions
and that all conditions precedent relating to the transaction have been complied
with.
The indenture further provides that, in the event of (a) a sale,
transfer or other disposition of all of the capital stock of a subsidiary
guarantor to a Person that is not an Affiliate of Waste Systems, the net
proceeds of which are applied by Waste Systems in accordance with the applicable
provisions of the indenture; (b) a sale, transfer or other disposition of all or
substantially all of the assets of a subsidiary guarantor to a Person that is
not an Affiliate of Waste Systems, the Net Cash Proceeds of which are applied by
Waste Systems in accordance with the "Limitation on Asset Sales" covenant; or
(c) the designation of the subsidiary guarantor as an Unrestricted Subsidiary,
in any the case in compliance with the terms of the indenture, then the
subsidiary guarantor will be deemed automatically and unconditionally released
and discharged from all of its obligations under its subsidiary guarantee
without any further action on the part of the trustee or any holder of the
Senior Notes.
Redemption
Mandatory Redemption. The Senior Notes will not be subject to any
mandatory sinking fund redemption before maturity.
Optional Redemption. The Senior Notes will be redeemable at our option,
in whole or in part, at any time on or after March 2, 2003, upon not less than
30 nor more than 60 days prior notice mailed by first class mail to each Senior
Note holder's last address as it appears in the security register. The Senior
Notes will be redeemable at the prices, expressed as percentages of the
principal amount of the Senior Notes, set forth below, plus in each case accrued
and unpaid interest, if any, to the date of redemption, if redeemed during the
periods set forth below (subject to the right of holders of record on the
relevant record date to receive interest due on an interest payment date):
Applicable Period....................................... Percentage
From March 2, 2003 to March 1, 2004..................... 106 7/8%
From March 2, 2004 to March 1, 2005..................... 103 7/16%
From March 2, 2005 to January 14, 2006.................. 101 23/32%
January 15, 2006 (Maturity)............................. 100 23/32%
In the case of any partial redemption, selection of the Senior Notes
for redemption will be made by the trustee in compliance with the requirements
of the principal national securities exchange or automated quotation system, if
any, on which the Senior Notes are listed or, if the Senior Notes are not listed
on a national securities exchange or automated quotation system, by lot or by
any other method as the trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Senior Note of $10,000 in principal amount or less
shall be redeemed in part. If any Senior Note is to be redeemed in part only,
the notice of redemption relating to the Senior Note shall state the portion of
the principal amount thereof to be redeemed. A new Senior Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Senior Note. Such new Senior
Notes can be obtained at the offices of the paying agents and transfer agents.
Ranking
The Senior Notes and the subsidiary guarantees will be senior unsecured
obligations of the respective obligors and will rank equally in right of payment
with all other existing and future senior unsecured obligations of Waste Systems
and the subsidiary guarantors, respectively. The Senior Notes and the subsidiary
guarantees will be effectively subordinated to all of Waste Systems's and our
subsidiaries' secured debt, including amounts outstanding under any bank credit
facility and Capital Lease Obligations, to the extent of the value of the assets
securing such loans. The Senior Notes will also be structurally subordinated to
all liabilities, including trade payables, of any subsidiaries that are not
subsidiary guarantors. As of March 31, 1999, Waste Systems and the subsidiary
guarantors had approximately $52.1 million of consolidated debt and Capital
Lease Obligations outstanding other than the Senior Notes, excluding accounts
payable, of which none would have been senior secured debt of a subsidiary
guarantor and $1.3 million were Capital Lease Obligations. Subject to particular
limitations, Waste Systems and our Restricted Subsidiaries may incur additional
Indebtedness in the future.
Change of Control
In the event of a Change of Control, each holder of Senior Notes will
have the right to require that Waste Systems purchase the holder's Senior Notes,
in whole or in part in integral multiples of $10,000, at a purchase price in
cash equal to 101% of the aggregate principal amount plus accrued and unpaid
interest, if any, to the date of purchase. This purchase price is referred to in
the indenture as the "Change of Control Purchase Price," in accordance with the
terms set forth in the indenture, which is referred to in the indenture as the
"Change of Control Offer."
Within 30 days following any Change of Control, Waste Systems will
notify the trustee and will mail a notice to each holder by first class mail,
postage prepaid, at the address of the holder appearing in the security register
stating, among other things: (1) that a Change of Control has occurred and that
the holder has the right to require Waste Systems to purchase the holder's
Senior Notes at the Change of Control Purchase Price in cash, subject to the
right of holders of record on a record date to receive interest on the relevant
interest payment date; (2) the repurchase date, which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date the notice is mailed
or any later date as is necessary to comply with requirements under the Exchange
Act; (3) that any Senior Note not tendered will continue to accrue interest; (4)
that unless Waste Systems defaults in the payment of the Change of Control
Purchase Price, any Senior Note accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control purchase
date; and (5) the procedures determined by Waste Systems, consistent with the
indenture, that a holder must follow to accept the Change of Control Offer or
withdraw his, her or its acceptance.
Waste Systems will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Senior Notes according to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with provisions of the indenture, Waste Systems
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached our obligations described in the indenture by complying
with applicable securities laws and regulations.
The term "Change of Control" includes, among other transactions, a
disposition of "all or substantially all" of the property and assets of Waste
Systems. The phrase "all or substantially all" as used in the indenture when
referring to the disposition of property or assets, varies according to the
facts and circumstances of the subject transaction. This phrase has no clearly
established meaning under the law which governs the indenture, New York law, and
is subject to judicial interpretation. Accordingly, in some circumstances there
may be a degree of uncertainty in ascertaining whether a particular transaction
would involve a disposition of "all or substantially all" of the property or
assets of a Person, and therefore it may be unclear as to whether a Change of
Control has occurred and whether Waste Systems is required to make an offer to
repurchase the Senior Notes as described above.
If a Change of Control Offer is made, we cannot assure you that we will
have available funds sufficient to pay the purchase price for all of the Senior
Notes that might be tendered by holders of the Senior Notes seeking to accept
the Change of Control Offer. Our failure to make or consummate the Change of
Control Offer or pay the applicable Change of Control Purchase Price when due
would result in an Event of Default and would give the trustee and the holders
of the Senior Notes the rights described below under the heading "--Events of
Default."
The existence of a holder's right to require Waste Systems to purchase
the holder's Senior Notes upon a Change of Control may deter a third party from
acquiring Waste Systems in a transaction that constitutes a Change of Control.
The definition of "Change of Control" in the indenture is limited in
scope. The provisions of the indenture may not afford holders of Senior Notes
the right to require Waste Systems to repurchase the Senior Notes in the event
of a highly leveraged transaction or particular transactions with our management
or our affiliates, including a reorganization, restructuring, merger or similar
transaction involving Waste Systems, including, in some circumstances, an
acquisition of Waste Systems by management or our affiliates, that may adversely
affect holders of the Senior Notes, if the transaction is not a transaction
defined as a Change of Control. A transaction involving our management or our
affiliates, or a transaction involving a recapitalization of Waste Systems,
would result in a Change of Control if it is the type of transaction specified
in the definition.
Waste Systems will not, and will not permit any Restricted Subsidiary
to, create any restriction, other than restrictions existing under Indebtedness
as in effect on the Closing Date or in refinancings of Indebtedness in effect,
that would materially impair the ability of Waste Systems to make a Change of
Control Offer to purchase the Senior Notes or, if a Change of Control Offer is
made, to pay for the Senior Notes tendered for purchase.
Certain Covenants
The indenture contains certain covenants for the benefit of the holders
of the Senior Notes, including, without limitation, the following:
Limitation on Indebtedness and Issuance of Preferred Stock.
(a)......Waste Systems will not, and will not permit any of our
Restricted Subsidiaries to, Incur any Indebtedness, including Acquired
Indebtedness, and Waste Systems will not issue any Disqualified Stock and will
not permit any of our Restricted Subsidiaries to issue any shares of Preferred
Stock or Disqualified Stock; provided, however, that: (1) Waste Systems may
Incur Indebtedness which is expressly subordinate and junior in right of payment
to the Senior Notes, and (2) Waste Systems and our Restricted Subsidiaries may
Incur Indebtedness, including Acquired Indebtedness, or issue Disqualified Stock
if:
(A) the Consolidated Fixed Charge Coverage Ratio for Waste
Systems's most recently ended full fiscal quarter for which financial
statements are available immediately preceding the date on which the
Indebtedness is Incurred or the Disqualified Stock is issued would have
been at least 1.5 to 1, if the last day of such fiscal quarter is on or
before December 31, 1999, or at least 2 to 1, if the last day of such
fiscal quarter is on or after January 1, 2000, in each case determined
on a pro forma basis in the manner set forth in the immediately
following full paragraph; and
(B) no Default or Event of Default has occurred and is continuing
In making the preceding calculation referred to in subparagraph (A)
above, pro forma effect will be given to: (1) the incurrence of the Indebtedness
or the issuance of Disqualified Stock and, if applicable, the application of the
net proceeds therefrom, including to refinance other Indebtedness, as if the
Indebtedness or Disqualified Stock was Incurred or issued, as the case may be,
and the application of the proceeds occurred at the beginning of the quarter;
(2) the Incurrence, issuance, repayment or retirement of any other Indebtedness
or Disqualified Stock, as the case may be, by Waste Systems or our Restricted
Subsidiaries since the first day of the quarter as if the Indebtedness or
Disqualified Stock, as the case may be, was Incurred, issued, repaid or retired
at the beginning of the quarter; and (3) the acquisition, whether by purchase,
merger or otherwise, or disposition, whether by sale, merger or otherwise, of
any company, entity or business acquired or disposed of by Waste Systems or our
Restricted Subsidiaries, as the case may be, since the first day of the quarter,
as if the acquisition or disposition occurred at the beginning of such quarter.
In making a computation under the preceding clause (1) or (2), (x) interest on
Indebtedness bearing a floating interest rate will be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
quarter, (y) if the Indebtedness bears, at the option of Waste Systems, a fixed
or floating rate of interest, interest thereon will be computed by applying, at
the option of Waste Systems, either the fixed or floating rate and (z) the
amount of Indebtedness under a revolving credit facility will be computed based
upon the average daily balance of the Indebtedness during such quarter.
Waste Systems's Consolidated Fixed Charge Coverage Ratio for the
quarter ended March 31, 1999 was (2.34) to 1.
(b)......Notwithstanding the preceding paragraph (a), Waste Systems and
any of our Restricted Subsidiaries may Incur each and all of the following
("Permitted Indebtedness"):
(1) Indebtedness under the Credit Facility and one or more
loan or credit agreements with one or more banks or financial
institutions; provided, that the aggregate principal amount of all
Indebtedness of Waste Systems and our Restricted Subsidiaries
outstanding under all credit facilities after giving effect to the
Incurrence does not exceed an amount equal to the greater of (A) $25
million and (B) an amount as, when added to all other Indebtedness then
outstanding, would result in total Indebtedness equal to twenty times
the Adjusted EBITDA of Waste Systems for the most recently ended fiscal
quarter for which financial statements are available immediately
preceding the date on which the Indebtedness was incurred, calculated
on a pro forma basis in the manner described in the penultimate
paragraph of subsection (a) above, minus in either case (x) the
aggregate amount of all mandatory repayments of the principal of any
term Indebtedness under a credit facility made by Waste Systems or any
of our Restricted Subsidiaries after the second anniversary of the date
of the indenture, except for repayments in connection with refinancing
Indebtedness permitted under clause (7) below, and (y) without
duplication, the aggregate amount of all Net Cash Proceeds of Asset
Sales applied by Waste Systems or any of our Restricted Subsidiaries to
permanently reduce the Indebtedness or commitments under the credit
facilities pursuant to the "Limitation on Asset Sales" covenant;
(2) Indebtedness of Waste Systems and its Restricted
Subsidiary Guarantors represented by the Senior Notes and the
subsidiary guarantees;
(3) Existing Indebtedness;
(4) Indebtedness owed by Waste Systems to any Wholly-Owned
Restricted Subsidiary or owed by a subsidiary guarantor to Waste
Systems or any Wholly-Owned Restricted Subsidiary; provided, that the
Indebtedness is held by Waste Systems or the Restricted Subsidiary and
constitutes Subordinated Indebtedness; provided further, that the
incurrence of such Indebtedness does not violate the "Limitation on
Restricted Payments" covenant;
(5) Indebtedness of Waste Systems or any Restricted Subsidiary
arising with respect to Interest Rate Agreement Obligations and
Currency Agreement Obligations incurred for the purpose of fixing or
hedging interest rate risk or currency risk;
(6) Indebtedness incurred by Waste Systems or any of its
Restricted Subsidiaries regarding letters of credit, bankers'
acceptances, surety or performance bonds or other instruments issued in
the ordinary course of business in amounts and for purposes customary
in Waste Systems's industry;
(7) Refinancing Indebtedness incurred by Waste Systems or any
of the Restricted Subsidiaries in connection with or given in exchange
for the renewal, extension, modification, amendment, refunding,
defeasance, refinancing or replacement of any of the Senior Notes or
any Existing Indebtedness or any Indebtedness issued after the Closing
Date and not incurred in violation of the indenture; provided, however,
that (A) the principal amount of the Refinancing Indebtedness shall not
exceed the principal amount, or accreted amount, if less, of the
Indebtedness so refinanced at the time outstanding, or obtainable under
any outstanding credit agreement, plus the premiums paid and the
reasonable expenses incurred in connection therewith; (B) with respect
to Indebtedness being refinanced, the Stated Maturity of the
Refinancing Indebtedness shall be not earlier than the Stated Maturity
of the Indebtedness being refinanced, and the Refinancing Indebtedness
shall have an Average Life at the time the Refinancing Indebtedness is
incurred that is equal to or greater than the remaining Average Life of
the Indebtedness being Refinanced; (C) concerning Subordinated
Indebtedness of Waste Systems being refinanced, the Refinancing
Indebtedness shall rank no more senior than, and shall be at least as
subordinated in right of payment to the Senior Notes as, the
Indebtedness being refinanced; and (D) the obligor of such Refinancing
Indebtedness shall be the obligor on the Indebtedness being refinanced
of Waste Systems or a Restricted Subsidiary;
(8) The Incurrence by Waste Systems or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or Purchase Money Obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of Waste Systems or any Restricted
Subsidiary, in an aggregate principal amount not to exceed $5.0 million
at any time outstanding;
(9) Guarantees by Waste Systems or any Restricted Subsidiary
of Indebtedness of Waste Systems or any Restricted Subsidiary that was
permitted to be Incurred in conformity with another provision of this
covenant;
(10) Guarantees by any Restricted Subsidiary made in
accordance with the provisions of the covenant in this section of the
prospectus entitled "--Limitation on Issuances of Guarantees of
Indebtedness; Additional Guarantors";
(11) Incurrence by Waste Systems's Unrestricted Subsidiaries,
if any, of non-recourse Indebtedness; provided, however, that if any of
this Indebtedness ceases to be Non-Recourse Indebtedness of an
Unrestricted Subsidiary, that event shall be deemed to constitute an
Incurrence of Indebtedness by a Restricted Subsidiary of Waste Systems
that was not permitted by this clause;
(12) The accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in
the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional
shares of the same class of Disqualified Stock; provided, in each case,
that the amount is included in Fixed Charges of Waste Systems as
accrued; and
(13) Indebtedness of Waste Systems or any Restricted
Subsidiary in addition to that described in clauses (1) through (12)
above, and any refinancings of that Indebtedness, so long as the
aggregate principal amount of all the Indebtedness Incurred according
to this clause (13) does not exceed $5.0 million at any one time
outstanding.
Any Indebtedness of a Person existing at the time that Person becomes a
Restricted Subsidiary, whether by merger, consolidation, acquisition or
otherwise, an "Acquired Person," shall be deemed to be Incurred by each
Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For purposes of determining compliance with this "Limitation on
Indebtedness and Issuance of Preferred Stock" covenant, if an item of proposed
Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness described above, or is entitled to be Incurred according to the
first paragraph of this covenant, Waste Systems will be permitted to classify,
or reclassify, that item of Indebtedness on the date of its Incurrence in any
manner that complies with this covenant.
Limitation on Restricted Payments. Waste Systems will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend on, or make any other payment
or distribution on account of Waste Systems's or any of its Restricted
Subsidiaries' capital stock, including, without limitation, any payment
in connection with any merger or consolidation involving Waste Systems
or any of its Restricted Subsidiaries, or to the direct or indirect
holders of Waste Systems's or any of its Restricted Subsidiaries'
capital stock in their capacity as such, other than (A) dividends or
distributions payable in capital stock, other than Disqualified Stock,
of Waste Systems, or (B) dividends or distributions by a Restricted
Subsidiary payable to Waste Systems or another Restricted Subsidiary;
(2) purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving Waste Systems or any Waste Systems subsidiary,
any shares of capital stock or any options, warrants or other rights to
acquire shares of capital stock of Waste Systems or any Waste Systems
subsidiary, other than any capital stock owned by Waste Systems or any
Restricted Subsidiary of Waste Systems;
(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value, any
Indebtedness that is subordinated to the Senior Notes or the subsidiary
guarantees, except a payment of interest or principal at the Stated
Maturity thereof; or
(4) make any Investment, other than a Permitted Investment;
all payments and other actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments," unless, at the time of and
immediately after giving effect to a Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing;
(b) Waste Systems could Incur at least $1.00 of additional
Indebtedness, other than Permitted Indebtedness pursuant to the first paragraph
of the "--Limitation on Indebtedness and Issuance of Preferred Stock" covenant;
and
(c) the aggregate amount of all Restricted Payments declared or
made by Waste Systems and its Restricted Subsidiaries after the date of the
indenture does not exceed the sum of:
(1) 50% of the Consolidated Net Income of Waste Systems for
the period, taken as one accounting period, from the beginning of Waste
Systems's first fiscal quarter commencing after the date of the
indenture to the end of Waste Systems's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment or, if such Consolidated Net Income for
such period is a loss, less 100% of such loss, plus
(2) 100% of the aggregate Net Proceeds received by Waste
Systems since the date of the indenture from the issuance or sale,
other than to a subsidiary, of capital stock of Waste Systems, other
than Disqualified Stock, or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of Waste Systems that have been converted into or exchanged
for such equity interests, other than capital stock, or Disqualified
Stock or debt securities, sold to a Waste Systems's subsidiary, plus
(3) to the extent that any Restricted Payment that was made
after the date of the indenture is sold for cash, other than to a
subsidiary, or otherwise liquidated or repaid for cash, the lesser of
(x) the cash return of capital regarding such Restricted Payment, less
the cost of disposition, if any, and (y) the initial amount of such
Restricted Payment.
In addition, so long as no Default or Event of Default has occurred and
is continuing or would be caused thereby, the following payments and other
actions shall be expressly permitted notwithstanding anything contained in this
"Limitations on Restricted Payments" covenant described above (collectively,
"Permitted Payments"):
(A) the payment of any dividend within 60 days after the date of
declaration thereof, if at said declaration date such payment would have been
permitted under the indenture and such payment shall be deemed to have been paid
on such date of declaration for purposes of clause (4) of the preceding
paragraph (c);
(B) the redemption, repurchase, retirement, defeasance or other
acquisition of any capital stock or any Indebtedness of Waste Systems or any
Restricted Subsidiary that is subordinated in right of payment to the Senior
Notes in exchange for, or out of the Net Proceeds of, the substantially
concurrent sale, other than to a subsidiary, of capital stock of Waste Systems,
other than any Disqualified Stock; provided that the amount of any Net Proceeds
that are utilized for any redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(2) of the preceding
paragraph;
(C) the defeasance, redemption, repurchase or other acquisition of
Subordinated Indebtedness of Waste Systems or any subsidiary guarantor with the
net proceeds from an Incurrence of Permitted Refinancing Indebtedness;
(D) any purchase or defeasance of Subordinated Indebtedness of
Waste Systems or any subsidiary guarantor to the extent required upon a Change
of Control or Asset Sale by the indenture or other agreement or instrument
pursuant to which Subordinated Indebtedness was issued, but only if Waste
Systems (x) in the case of a Change of Control, has complied with our
obligations under the provisions described under "--Change of Control" or (y) in
the case of an Asset Sale has applied the Net Cash Proceeds from that Asset Sale
in accordance with the provisions under the "Limitation on Asset Sales"
covenant;
(E) any Restricted Payments made with the proceeds of the
substantially concurrent sale of capital stock other than Disqualified Stock;
(F) the repurchase of capital stock of Waste Systems or any
Restricted Subsidiary, including options, warrants or other rights to acquire
the capital stock, from directors, officers or employees, or their nominees, of
Waste Systems or our subsidiaries according to the terms of an employee benefit
plan or employment agreement or similar arrangement; provided that the aggregate
amount of all repurchases, net of repayments or cancellations of indebtedness as
a result of repurchases, shall not exceed $0.5 million in any twelve-month
period;
(G) the repurchase by Waste Systems of 500,000 shares of the
common stock from the Federal Deposit Insurance Corporation for an aggregate
purchase price not to exceed $2.8 million out of the net proceeds of the sale of
the Senior Notes;
(H)......the payment by Waste Systems out of the net proceeds of the
sale of the Senior Notes of $20.0 million, representing the entire principal
amount outstanding of Waste Systems's 13% short term notes due June 30, 1999;
(I) the repayment by Waste Systems out of the net proceeds of the
sale of the Senior Notes of capital leases and equipment notes payable
outstanding on the closing date in an aggregate amount not to exceed $4.0
million;
(J) the redemption out of the net proceeds of the sale of the
Senior Notes of some of Waste Systems's 10% convertible subordinated debentures
due October 6, 2000 in an aggregate principal amount not to exceed $1.85
million; and
(K) Restricted Payments, other than a dividend or other
distribution declared on any capital stock of Waste Systems or a payment to
purchase, redeem or otherwise acquire or retire for value any capital stock of
Waste Systems, not to exceed $5.0 million in the aggregate.
The amount of all Restricted Payments, other than cash, shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Waste Systems or any
Restricted Subsidiary, pursuant to the Restricted Payment. The fair market value
of any assets or securities that are required to be valued by this covenant
shall be determined by the board of directors whose resolution concerning such
valuation shall be delivered to the trustee. The board of directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, Waste Systems shall deliver to the trustee an officers'
certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this "Limitation on Restricted
Payments" covenant were computed, together with a copy of any fairness opinion
or appraisal required by the indenture.
Limitation on Asset Sales.
(a) Waste Systems will not, and will not permit any Restricted
Subsidiary to, consummate any Asset Sale unless (1) Waste Systems or the
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets or other
property sold or disposed of in the Asset Sale and (2) at least 75% of such
consideration consists of either cash or cash equivalents.
(b) Within 365 days after any Asset Sale, Waste Systems may elect
to apply the Net Cash Proceeds from any Asset Sale to: (1) permanently reduce or
redeem amounts outstanding under the Credit Facility or any credit facility
referred to in clause (b)(1) of the "Limitation on Indebtedness and Issuance of
Preferred Stock" covenant or to the repayment of other senior Indebtedness of
Waste Systems or a Restricted Subsidiary; and/or (2) make, or enter into a
legally binding agreement to make, an Investment, in, or acquire assets and
properties that will be used in the business of Waste Systems and our Restricted
Subsidiaries at the Closing Date. Any balance of Net Cash Proceeds exceeding
$10.0 million and not applied or invested as provided in clauses (1) and (2)
within 365 days of any Asset Sale, will be deemed to constitute "Excess
Proceeds" and will be applied to make an offer to purchase the Senior Notes,
which is referred to as an Asset Sale Offer, to the holders of the Senior Notes.
Pending the final application of any Net Cash Proceeds, Waste Systems may
temporarily invest Net Cash Proceeds in cash or cash equivalents.
For the purposes of this covenant, the following will be deemed to be
cash: (x) the assumption by the transferee of Indebtedness of Waste Systems or
Indebtedness of any Restricted Subsidiary of Waste Systems and the release of
Waste Systems or the Restricted Subsidiary from all liability on the
Indebtedness in connection with the Asset Sale, in which case Waste Systems
shall, without further action, be deemed to have applied the assumed
Indebtedness in accordance with clause (1) of the preceding paragraph (b), and
(y) securities received by Waste Systems or any Restricted Subsidiary of Waste
Systems from the transferee that are promptly, and in any event within 120 days,
converted by Waste Systems or the Restricted Subsidiary into cash.
(c)......In the event of an Asset Sale that requires Waste Systems to
make an Asset Sale Offer in conformity with paragraph (b) above, Waste Systems
will be required to purchase the Senior Notes tendered pursuant to an offer by
Waste Systems for the Senior Notes at a purchase price of 100% of their
principal amount plus accrued and unpaid interest, if any, to the purchase date
in accordance with the procedures, including prorating in the event of
oversubscription, set forth in the indenture. If the aggregate purchase price of
the Senior Notes tendered according to the offer is less than the Net Cash
Proceeds allotted to the purchase of the Senior Notes, Waste Systems will apply
the remaining Net Cash Proceeds to general corporate purposes not prohibited by
the indenture. If the aggregate principal amount of Senior Notes validly
tendered and not withdrawn by holders exceeds the Excess Proceeds, the Senior
Notes to be purchased will be selected on a pro rata basis. Upon the
consummation of any Asset Sale Offer, the amount of Excess Proceeds shall be
deemed to be reset to zero.
(d)......Waste Systems will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other applicable
securities laws or regulations in connection with the repurchase of the Senior
Notes pursuant to the indenture and will not be deemed to have breached its
obligations under the indenture by virtue thereof.
Limitation on Liens. Waste Systems will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, Incur or suffer to exist any Lien on any
of its assets or properties of any character, or any shares of capital stock or
Indebtedness of any Restricted Subsidiary, without making effective provision
for all of the Senior Notes and all other amounts due under the Indenture to be
directly secured equally and ratably with, or before, if the obligation or
liability to be secured by any Lien is subordinated in right of payment to the
Senior Notes, the obligation or liability secured by any Lien.
The preceding limitation does not apply to:
(1) Liens existing on the Closing Date, including Liens
securing obligations under the Credit Facility or any other credit
facility outstanding on the date of the indenture or permitted to be
incurred under clause (b)(1) of the "Limitation on Indebtedness and
Issuance of Preferred Stock" covenant;
(2) Liens granted after the Closing Date on any assets or
capital stock of Waste Systems or our Restricted Subsidiaries created
in favor of the holders;
(3) Liens regarding the assets of a Restricted Subsidiary
granted by the Restricted Subsidiary to Waste Systems or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to Waste Systems or
the other Restricted Subsidiary;
(4) Liens securing Indebtedness which is incurred owing to
Waste Systems or another Restricted Subsidiary;
(5) Liens securing Indebtedness which is incurred to refinance
secured Indebtedness which is permitted to be Incurred under the second
paragraph of the "Limitation on Indebtedness and Issuance of Preferred
Stock" covenant; provided that the Liens do not extend to or cover any
property or assets of Waste Systems or any Restricted Subsidiary other
than the property or assets securing the Indebtedness being refinanced;
(6) Liens on any property or assets of Waste Systems or any
Restricted Subsidiary securing Indebtedness of Waste Systems or any
Restricted Subsidiary permitted under the "Limitation on Indebtedness
and Issuance of Preferred Stock" covenant;
(7) Liens concerning real property to secure Indebtedness
Incurred in conformity with clause (b)(8) of the "Limitation on
Indebtedness and Issuance of Preferred Stock" covenant; or
(8) Permitted Liens, as defined below.
Limitation on Transactions With Affiliates. Waste Systems will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into any
transaction or series of related transactions, including, without limitation,
the sale, purchase, exchange or lease of assets, property or services, with any
Affiliate, other than Waste Systems or a Restricted Subsidiary of Waste Systems,
unless:
(1) the transaction or series of transactions is on terms that
are no less favorable to Waste Systems or the Restricted Subsidiary, as
the case may be, than would be available in a comparable transaction in
arm's-length dealings with an unrelated third party; and
(2) Waste Systems delivers to the trustee, (A) regarding any
transaction or series of related transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the board of
directors set forth in an officers' certificate certifying that the
transaction or series of related transactions complies with this
covenant and has been approved by a majority of the disinterested
members of the board of directors of Waste Systems, and (B) regarding
any transaction or series of transactions involving aggregate
consideration in excess of $10.0 million, an opinion as to the fairness
of the transaction to Waste Systems or any Restricted Subsidiary, from
a financial point of view, issued by an accounting, appraisal or
investment banking firm of national standing.
The preceding covenant will not restrict any of the following:
(a) employment agreements, compensation or employee benefit
arrangements, stock options or stock purchase plans or agreements with
or for the benefit of any officer, director or employee of Waste
Systems entered into in the ordinary course of business and approved by
the board of directors of Waste Systems, including customary fringe
benefits and reimbursement or advancement of out of pocket expenses,
loans to employees in the ordinary course of business, and director's
and officer's liability insurance and indemnification arrangements;
(b) any transaction solely between or among Waste Systems and
any of its Restricted Subsidiaries or solely between Restricted
Subsidiaries;
(c) the payment of reasonable and customary regular fees to
directors of Waste Systems or any Restricted Subsidiary who are not
employees of Waste Systems or any Restricted Subsidiary;
(d) any Restricted Payment not prohibited by the "Limitation
on Restricted Payments" covenant;
Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries.
Waste Systems will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of capital stock of a
Restricted Subsidiary, including options, warrants or other rights to purchase
shares of capital stock, except:
(1) to Waste Systems or a Wholly Owned Restricted Subsidiary;
(2) issuances of director's qualifying shares or sales to
foreign nationals of shares of capital stock of foreign Restricted
Subsidiaries, to the extent required by applicable law;
(3) if, immediately after giving effect to any issuance or
sale, the Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in that Person remaining after giving
effect to the issuance or sale would have been permitted to be made
under the "Limitation on Restricted Payments" covenant if made on the
date of the issuance or sale; or
(4) the issuance or sale of common stock of any Restricted
Subsidiaries if the proceeds thereof are applied in accordance with the
"Limitation on Asset Sales" covenant.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. Waste Systems will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to:
(1) pay dividends, in cash or otherwise, or make any other
distributions permitted by applicable law on or in respect of its
capital stock,
(2) pay any Indebtedness owed to Waste Systems or any other
Restricted Subsidiary,
(3) make loans or advances to Waste Systems or any other
Restricted Subsidiary,
(4) transfer any of its property or assets to Waste Systems or
any other Restricted Subsidiary, or
(5) Guarantee Indebtedness of Waste Systems or any other
Restricted Subsidiary.
The preceding provisions shall not restrict any encumbrances or
restrictions under or as a result of any of the following:
(a) any agreement in effect on the Closing Date, and any
extensions, refinancings, renewals or replacement of those agreements;
provided that the encumbrances and restrictions in any extensions,
refinancings, renewals or replacements are no less favorable to Waste
Systems or any Restricted Subsidiary than those encumbrances or
restrictions in the original agreement;
(b) existing under or as a result of applicable law;
(c) the indenture, the Senior Notes and the subsidiary
guarantees;
(d) with respect to any Person or the property or assets of a
Person acquired by Waste Systems or any Restricted Subsidiary, existing
at the time of the acquisition and not incurred in contemplation of any
acquisition, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than the
Person or the property or assets of the Person so acquired;
(e) in the case of clause (4) of the first paragraph of this
"Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant,
(1) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar
property or asset,
(2) existing by virtue of any transfer of, agreement
to transfer, option or right with respect to, or Lien on any
property or assets of Waste Systems or any Restricted
Subsidiary not otherwise prohibited by the indenture, or
(3) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of
property or assets of Waste Systems or any Restricted
Subsidiary in any manner material to Waste Systems or any
Restricted Subsidiary;
(f) with respect to a Restricted Subsidiary and imposed
according to an agreement that has been entered into for the sale or
disposition of all or substantially all of the capital stock of, or
property and assets of, that Restricted Subsidiary;
(g) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing the Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness being
refinanced;
(h) provisions concerning the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(i) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary
course of business; and
(j) restrictions imposed with respect to a subsidiary of Waste
Systems imposed pursuant to a binding agreement which has been entered
into for the sale or disposition of all or substantially all of the
capital stock or assets of such subsidiary, provided that the
disposition will comply with the covenant entitled "Limitation on Asset
Sales."
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent Waste Systems or any
Restricted Subsidiary from creating, incurring, assuming or suffering to exist
any Liens otherwise permitted in the "Limitation on Liens" covenant or
restricting the sale or other disposition of property or assets of Waste Systems
or any of its Restricted Subsidiaries that secure Indebtedness of Waste Systems
or any of its Restricted Subsidiaries.
Limitation on Sale-Leaseback Transactions. Waste Systems will not, and will not
permit any Restricted Subsidiary to, enter into any sale-leaseback transaction
involving any of its assets or properties whether now owned or hereafter
acquired, where Waste Systems or a Restricted Subsidiary sells or transfers
assets or properties and then or thereafter leases the transferred assets or
properties or any part thereof or any other assets or properties which Waste
Systems or a Restricted Subsidiary, intends to use for substantially the same
purpose or purposes as the assets or properties sold or transferred.
The preceding restriction does not apply to any sale-leaseback
transaction if:
(1) Waste Systems or the Restricted Subsidiary could have
Incurred Indebtedness in an amount equal to the attributable
Indebtedness relating to the sale and leaseback transaction under the
Consolidated Fixed Charge Coverage Ratio test in the first paragraph of
the covenant described above under the caption "--Limitation on
Indebtedness and Issuance of Preferred Stock" and Incurred a Lien to
secure the Indebtedness pursuant to the covenant described above under
the caption "--Limitation on Liens";
(2) the gross cash proceeds of that sale and leaseback
transaction are at least equal to the fair market value, as determined
in good faith by the board of directors and set forth in an officers'
certificate delivered to the trustee, of the property that is the
subject of the sale and leaseback transaction; and
(3) the transfer of assets in that sale and leaseback
transaction is permitted by, and Waste Systems applies the proceeds of
that transaction in compliance with, the covenant described above under
the caption "--Limitation on Asset Sales."
Limitation on Designation of Unrestricted Subsidiaries. Waste Systems will not
designate any Waste Systems subsidiary, other than a newly created subsidiary in
which no Investment in excess of $1,000 has previously been made, as an
Unrestricted Subsidiary under the indenture after the Closing Date unless:
(1) no Default shall have occurred and be continuing at the
time of or after giving effect to the designation as an Unrestricted
Subsidiary; and
(2) Waste Systems would not be prohibited under the indenture
from making an Investment at the time of the designation in an amount
equal to the fair market value of the Restricted Subsidiary on that
date.
If a Restricted Subsidiary is designated as an Unrestricted Subsidiary,
all outstanding Investments owned by Waste Systems and our Restricted
Subsidiaries in the subsidiary so designated will be deemed to be an Investment
made as of the time of the designation and will reduce the amount available for
Restricted Payments under the covenant described above under the caption
"--Limitation on Restricted Payments" for all purposes of the indenture in the
requisite amount. The indenture will further provide that neither Waste Systems
nor any Restricted Subsidiary shall at any time (x) provide a Guarantee of or
similar undertaking, including any undertaking, agreement or instrument
evidencing any Indebtedness, concerning any Indebtedness of an Unrestricted
Subsidiary; provided that Waste Systems and our Restricted Subsidiaries may
pledge capital stock or Indebtedness of any Unrestricted Subsidiary on a
nonrecourse basis in order that the pledgee has no claim whatsoever against
Waste Systems other than to obtain the pledged property; or (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary, except to
the extent permitted under the covenants described above under the "Limitation
on Restricted Payments" covenant.
Waste Systems will not revoke any designation of a subsidiary as an
Unrestricted Subsidiary, unless:
(1) no Default shall have occurred and be continuing at the
time of and after giving effect to such Revocation; and
(2) all Liens and Indebtedness of that Unrestricted Subsidiary
outstanding immediately following that revocation shall be deemed to
have been incurred at that time and shall have been permitted to be
incurred for all purposes of the indenture.
All requisite designations and requisite revocations must be evidenced
by resolutions of the board of directors of Waste Systems delivered to the
trustee certifying compliance with the preceding provisions.
Limitation on Issuances of Guarantees of Indebtedness; Additional Guarantors.
Waste Systems will not permit any of its Restricted Subsidiaries, directly or
indirectly, to guarantee or pledge any assets to secure the payment of any
Indebtedness of Waste Systems under any credit facility unless the Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for the guarantee of the payment of the Senior Notes by the Restricted
Subsidiary on a senior unsecured basis.
Notwithstanding the preceding paragraph, each subsidiary guarantee of
the Senior Notes will provide by its terms that it will be automatically and
unconditionally released and discharged under the circumstances described above
under the caption "--Subsidiary Guarantees."
Reports. Whether or not required by the Securities and Exchange Commission, so
long as any Senior Notes are outstanding, Waste Systems will furnish to the
holders of the Senior Notes, within the time periods specified in the Securities
and Exchange Commission's rules and regulations:
(1) all quarterly and annual financial information that would
be required to be contained in a filing with the Securities and
Exchange Commission on Forms 10-Q and 10-K if Waste Systems were
required to file these forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report on the annual
financial statements by Waste Systems's certified independent
accountants; and
(2) all current reports that would be required to be filed
with the Securities and Exchange Commission on Form 8-K if Waste
Systems were required to file these reports.
If Waste Systems has designated any of its subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes, and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," of the financial condition and results of operations of Waste
Systems and the Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of Waste Systems.
In addition, whether or not required by the Securities and Exchange
Commission, Waste Systems will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the Securities and Exchange
Commission for public availability within the time periods specified in the
Securities and Exchange Commission's rules and regulations, unless the
Securities and Exchange Commission will reject such a filing, and make such
information available to securities analysts and prospective investors upon
request.
Additional Covenants. The indenture will also contain covenants concerning the
following matters:
o payment of principal, premium and interest;
o maintenance of an office or agency in the City of New York;
o maintenance of corporate existence; and
o provision of financial statements.
Merger, Consolidation or Sale of Assets
Waste Systems will not consolidate with or merge with or into, or
convey or transfer or lease in one transaction or a series of related
transactions, all or substantially all of its assets to, another Person unless:
(1) the resulting, surviving or transferred successor
corporation is a corporation organized and existing under the laws of
the United States or any state thereof or the District of Columbia and,
if other than Waste Systems, assumes by supplemental indenture all the
obligations of Waste Systems under the Senior Notes and the indenture;
(2) immediately after giving effect to the transaction, no
Default or Event of Default exists; and
(3) immediately after giving pro forma effect to the
transaction and any related financing transactions, the successor
corporation would be permitted to incur at least $1.00 of Indebtedness
according to the Consolidated Fixed Charge Coverage Ratio test set
forth in the first paragraph of the "Limitation on Indebtedness and
Issuance of Preferred Stock" covenant.
The successor corporation shall be the successor to Waste Systems under
the indenture, and in the case of any transfer, Waste Systems shall be released
from its obligations under the indenture and the Senior Notes. Notwithstanding
the preceding, this "Merger, Consolidation and Sale of Assets" covenant will not
apply to a sale, assignment, transfer, conveyance or other disposition of assets
between or among Waste Systems and any of its Wholly Owned Restricted
Subsidiaries or any of the subsidiary guarantors.
Events of Default
Each of the following constitutes an event of default under the
indenture:
(a) Default for 30 days in the payment when due of interest on
any Senior Note, whether or not prohibited by the subordination
provisions of the indenture;
(b) Default in the payment when due of principal of or
premium, if any, with respect to any Senior Note at its stated
maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise;
(c) failure by Waste Systems or any Restricted Subsidiaries to
comply with the provisions described under the captions "--Merger,
Consolidation and Sale of Assets" and "--Change of Control" and under
the covenants described under "--Certain Covenants--Limitation on Asset
Sales," "--Limitation on Restricted Payments" or "--Limitation on
Indebtedness and Issuance of Preferred Stock" above;
(d) failure by Waste Systems to observe or perform any of its
non-payment covenants or agreements contained in the indenture, other
than a default in the performance, or breach, of a covenant or
agreement specifically described in paragraph (c) above, and such
default continues for 30 days after notice.
(e) Default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by Waste Systems or any Restricted
Subsidiaries, or the payment of which is Guaranteed by Waste Systems or
any Restricted Subsidiaries, whether the Indebtedness or Guarantee now
exists, or is created after the date of the indenture, if that default:
(1) is caused by a failure to pay principal of or
premium, if any, or interest on the Indebtedness before the
expiration of the grace period provided in that Indebtedness
on the date of the default (a "Payment Default"); or
(2) results in the acceleration of the Indebtedness
before its express maturity;
and, in each case, the principal amount of any Indebtedness, together
with the principal amount of any other Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(f) any judgment or decree for the payment of money in excess
of $5.0 million, to the extent not covered by insurance, is entered
against Waste Systems or a Restricted Subsidiary, remains outstanding
for a period of 60 days after the judgment or decree becomes final and
non-appealable, and is not discharged, waived or the execution thereof
stayed for a period of 10 days after notice;
(g) except as permitted by the indenture, any subsidiary
guarantee shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason to be in full force and effect
or any subsidiary guarantor, or any Person acting on behalf of any
subsidiary guarantor, shall deny or disaffirm its obligations under its
subsidiary guarantee; and
(h) specific events of bankruptcy, insolvency or
reorganization of Waste Systems or a subsidiary guarantor. However, a
default under clause (d), (e) or (f) above will not constitute an Event
of Default until the trustee or the holders of 25% in principal amount
of the outstanding Senior Notes notify Waste Systems of the Default and
Waste Systems does not cure the Default within the time specified after
receipt of such notice.
If an Event of Default, other than as specified in clause (h) above,
occurs and is continuing, the trustee may, and at the request of at least 25% in
principal amount of the outstanding Senior Notes shall, by notice to Waste
Systems declare the principal of and accrued and unpaid interest, if any, on all
the Senior Notes to be immediately due and payable. Upon a declaration,
principal and accrued and unpaid interest shall be due and payable immediately.
If an Event of Default relating to particular events of bankruptcy, insolvency
or reorganization of Waste Systems occurs and is continuing, then the principal
of and accrued and unpaid interest, if any, on all the Senior Notes will become
and be immediately due and payable without any declaration or other act on the
part of the trustee or any holder. Under certain circumstances, the holders of a
majority in principal amount of the outstanding Senior Notes may (1) rescind
acceleration concerning the Senior Notes and their consequences and (2) waive,
on behalf of the holders of all of the Senior Notes, any existing Default or
Event of Default and its consequences under the indenture except a continuing
Default or Event of Default in the payment of interest on, or the principal of
or premium, if any, regarding the Senior Notes.
Subject to the provisions of the indenture relating to the duties of
the trustee, if an Event of Default occurs and is continuing, the trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders unless the holders
have offered to the trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium, if any, or interest when due, no holder may pursue any
remedy concerning the indenture or the Senior Notes unless:
(1) the holder has previously given the trustee notice that an
Event of Default is continuing;
(2) holders of at least 25% in principal amount of the
outstanding Senior Notes have requested the trustee to pursue the
remedy;
(3) the holders have offered the trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the trustee has not complied with a request within 60 days
after the receipt of the request and the offer of security or
indemnity; and
(5) the holders of a majority in principal amount of the
outstanding Senior Notes have not given the trustee a direction that,
in the opinion of the trustee, is inconsistent with the request within
the 60-day period.
Subject to specific restrictions, the holders of a majority in principal amount
of the outstanding Senior Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or to exercise any trust or power conferred on the trustee. The trustee,
however, may refuse to follow any direction that conflicts with law or the
indenture or that the trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the trustee in personal liability. Prior
to taking any action under the indenture, the trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The indenture provides that if a Default occurs and is continuing and
is known to the trustee, the trustee must mail to each holder notice of the
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of, premium, if any, or interest on, any Senior Note, the
trustee may withhold notice if and so long as its board of directors, a
committee of its board of directors or a committee of its trust officers in good
faith determines that withholding notice is in the interests of the holders of
the Senior Notes. In addition, Waste Systems is required to deliver to the
trustee, within 90 days after the end of each fiscal year, a certificate
indicating whether the signers thereof know of any Default that occurred during
the previous year. Waste Systems also is required to deliver to the trustee,
within 30 days after the occurrence thereof, written notice of any events which
constitute certain Defaults.
In the case of any Event of Default occurring as a result of any
willful action or inaction taken or not taken by or on behalf of Waste Systems
with the intention of avoiding payment of the premium that Waste Systems would
have had to pay if Waste Systems then had elected to redeem the Senior Notes in
conformity with the optional redemption provisions of the indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Senior Notes. If an Event
of Default occurs before March 2, 2003 as a result of any willful action, or
inaction, taken, or not taken, by or on behalf of Waste Systems with the
intention of avoiding the prohibition on redemption of the Senior Notes before
March 2, 2003, then the premium specified in the indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Senior Notes.
Defeasance
Legal Defeasance. Waste Systems, at its option and at any time may terminate all
its obligations discharged with respect to the outstanding Senior Notes and the
indenture and all obligations of the subsidiary guarantors may be discharged
with respect to the subsidiary guarantees except for:
(1) the rights of holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and
interest on such Senior Notes when such payments are due;
(2) Waste Systems's obligations to issue temporary Senior
Notes, register the transfer or exchange of any Senior Notes, replace
mutilated, destroyed, lost or stolen Senior Notes and maintain an
office or agency for payments in respect of the Senior Notes
outstanding and hold the payments in trust;
(3) the rights, powers, trusts, duties and immunities of the
trustee, and Waste Systems's obligations in connection therewith; and
(4) the legal defeasance provisions of the indenture.
Covenant Defeasance. Waste Systems may, at its option and at any time, elect to
have the obligations of Waste Systems and the subsidiary guarantors released
with regard to specific covenants set forth in the indenture and described under
"--Certain Covenants" above and, after release, any omission to comply with
these covenants shall not constitute a Default or Event of Default with respect
to the Senior Notes. In the event covenant defeasance occurs, certain events,
not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events, described under "--Events of Default" will no longer
constitute an Event of Default with respect to the Senior Notes.
In order to exercise either legal defeasance or covenant defeasance:
(1) Waste Systems must irrevocably deposit or cause to be
deposited with the trustee, as trust funds in trust, for the benefit of
the holders of the Senior Notes, cash in United States dollars,
noncallable United States government obligations or a combination of
the above, in amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on the outstanding
Senior Notes on the stated maturity or on the applicable redemption
date, as the case may be, of the principal, premium, if any, or
installment of interest and Waste Systems must specify whether the
Senior Notes are being defeased to maturity or to a particular
redemption date;
(2) no Default or Event of Default has occurred and is
continuing either: (A) on the date of such deposit, other than a
Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit; or (B) insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(3) the legal defeasance or covenant defeasance may not result
in a breach or violation of, or constitute a default under any material
agreement or instrument, other than the indenture, to which Waste
Systems or any subsidiary guarantor is a party or by which it is bound;
(4) in the case of legal defeasance, Waste Systems must
deliver to the trustee an opinion of counsel reasonably acceptable to
the trustee confirming that (A) Waste Systems has received from, or
there has been published by, the Internal Revenue Service a ruling or
(B) since the date of the indenture, there has been a change in
applicable federal income tax law, in either case to the effect, and
based thereon such opinion of counsel shall confirm, the holders of the
outstanding Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of the legal defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the legal
defeasance had not occurred;
(5) in the case of covenant defeasance, Waste Systems must
deliver to the trustee an opinion of counsel reasonably acceptable to
the trustee confirming that the holders of the outstanding Senior Notes
will not recognize income, gain or loss for federal income tax purposes
as a result of the covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if the covenant defeasance had not
occurred;
(6) Waste Systems must deliver to the trustee an opinion of
counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(7) Waste Systems must deliver to the trustee an officers'
certificate stating that the deposit was not made by Waste Systems with
the intent of preferring the holders of Senior Notes over the other
creditors of Waste Systems with the intent of defeating, hindering,
delaying or defrauding creditors of Waste Systems or others; and
(8) Waste Systems must deliver to the trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent relating to the legal defeasance or the covenant defeasance
have been complied with.
Satisfaction and Discharge of the Indenture
The indenture will cease to be of further effect, except as otherwise
expressly provided for in the indenture, when either all outstanding Senior
Notes have been delivered, other than lost, stolen or destroyed Senior Notes
which have been replaced, to the trustee for cancellation or all outstanding
Senior Notes have become due and payable, whether at maturity or as a result of
the mailing of a notice of redemption pursuant to the terms of the indenture and
Waste Systems has irrevocably deposited with the trustee funds sufficient to pay
at maturity or upon redemption all outstanding Senior Notes, including interest
thereon, other than lost, stolen, mutilated or destroyed Senior Notes which have
been replaced, and, in either case, Waste Systems has paid all other sums
payable under the indenture. The trustee is required to acknowledge satisfaction
and discharge of the indenture on demand of Waste Systems accompanied by an
officer's certificate and an opinion of counsel at the cost and expense of Waste
Systems.
Transfer and Exchange
Upon any transfer of a Senior Note, the registrar may require a holder
to furnish appropriate endorsements and transfer documents, and to pay any taxes
and fees required by law or permitted by the indenture. The registrar is not
required to transfer or exchange any Senior Notes selected for redemption nor is
the registrar required to transfer or exchange any Senior Notes for a period of
15 days before a selection of Senior Notes to be redeemed. The registered holder
of a Senior Note may be treated as the owner of it for all purposes.
Amendments and Waivers
Except as set forth in this prospectus, the indenture and any
subsidiary guarantee may be modified and amended by Waste Systems, each
subsidiary guarantor and the trustee with the consent of the holders of a
majority in aggregate principal amount of the Senior Notes then outstanding and
any past default or compliance with any provisions may be waived with the
consent of the holders of a majority in principal amount of the Senior Notes
then outstanding. However, without the consent of each holder of an outstanding
Senior Note affected, no amendment or waiver may, among other things,
(1) reduce the principal amount of Senior Notes whose holders
must consent to an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of
interest on any Senior Note;
(3) reduce the principal of or extend the Stated Maturity of
any Senior Note;
(4) reduce the premium payable upon the redemption or
repurchase of any Senior Note or change the time at which any Senior
Note may be redeemed as described under "Redemption" above;
(5) make any Senior Note payable in money other than that
stated in the Senior Note;
(6) impair the right of any holder to receive payment of
principal of and interest on the holder's Senior Notes on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or concerning the holder's Senior Notes;
(7) make any change in the provisions of the indenture
relating to waivers of past Defaults or Events of Default or the rights
of holders of Senior Notes to receive payments of principal of or
premium, if any, or interest on the Senior Notes;
(8) waive a redemption payment concerning any Senior Note; or
(9) make any change in the preceding amendment and waiver
provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to a Change of Control or the Change of Control Offer that
adversely affects the rights of the holders of the Senior Notes will require the
consent of the holders of at least 75% in aggregate principal amount of Senior
Notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of
Senior Notes, Waste Systems, the subsidiary guarantors and the trustee may amend
or supplement the indenture or the Senior Notes:
(1) to cure any ambiguity, defect or inconsistency; provided
that those actions do not adversely affect the interests of holders of
the Senior Notes in any material respect;
(2) to provide for uncertificated Senior Notes in addition to
or in place of certificated Senior Notes;
(3) to provide for the assumption by a successor corporation
of Waste Systems's obligations to holders of Senior Notes in the case
of a merger or consolidation or sale of all or substantially all of
Waste Systems's assets;
(4) to make any change that would provide any additional
rights or benefits to the holders of Senior Notes or that does not
adversely affect the legal rights under the indenture of any holder;
(5) to comply with any requirement of the Securities and
Exchange Commission in order to effect or maintain the qualification of
the indenture under the Trust Indenture Act;
(6) to add additional Events of Default;
(7) to evidence and provide for the acceptance of appointment
under the indenture by a successor trustee;
(8) to secure the Senior Notes; and
(9) to add new subsidiary guarantors or release subsidiary
guarantors in accordance with the terms of the indenture.
Concerning the Trustee
IBJ Whitehall Bank & Trust Company is to be the trustee under the
indenture and has been appointed by Waste Systems as registrar and paying agent
with regard to the Senior Notes. The trustee's current address is One State
Street, New York, New York 10004.
The indenture contains certain limitations on the rights of the
trustee, should it become a creditor of Waste Systems, to obtain payment of
claims in particular cases or to realize on certain property received in respect
of any such claim as security or otherwise. The trustee will be permitted to
engage in other transactions, however, if it acquires any conflicting interest,
as defined, it must eliminate any conflict or resign.
The holders of a majority in aggregate principal amount of the
then-outstanding Senior Notes issued under the indenture will have the right to
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the trustee. The indenture provides that in case an
Event of Default shall occur, which shall not be cured, the trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to this limitation, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request of any of the holders of the Senior Notes issued under
the indenture unless they shall have offered to the trustee security and
indemnity satisfactory to it.
Governing Law
The indenture provides that it and the Senior Notes will be governed
by, and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person is merged with or into Waste Systems or becomes a Restricted
Subsidiary or assumed by Waste Systems or a Restricted Subsidiary in connection
with the acquisition of assets from such Person and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such acquisition of assets.
"Adjusted EBITDA" means, with respect to Waste Systems and the
Restricted Subsidiaries for any period, the EBITDA of Waste Systems and the
Restricted Subsidiaries for such period plus the following: (a) one-time charges
incurred during such period associated with the write-off of landfill
development costs; (b) costs incurred during such period associated with the
integration of acquired companies and businesses into Waste Systems's
operations, including, without limitation, costs related to termination and
retention of employees, lease termination costs, costs related to the
integration of information systems, and costs related to the change of the name
of the acquired company or business; and (c) restructuring costs incurred during
such period.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control," including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with," of any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Sale" means any sale, issuance, lease, conveyance, transfer or
other disposition, including, without limitation, by way of merger or
consolidation, collectively, a "transfer," by Waste Systems or any Restricted
Subsidiary, other than to Waste Systems or a Restricted Subsidiary and other
than directors' qualifying shares, directly or indirectly, in one transaction or
in a series of related transactions of (a) any capital stock, other than
Disqualified Stock, of any Restricted Subsidiary, (b) all or substantially all
of the properties and assets of Waste Systems and its Restricted Subsidiaries
representing a division or line of business or (c) any other properties or
assets of Waste Systems or any Restricted Subsidiary, other than in the ordinary
course of business; provided, however, the following transactions shall not be
deemed Asset Sales:
(1) the transfer of accounts receivable (or participations
therein) in connection with any accounts receivables financing;
(2) the transfer of capital stock or Indebtedness or other
securities of an Unrestricted Subsidiary;
(3) the transfer of assets pursuant to and in accordance with
the limitation on mergers, sales or consolidations provisions in the
indenture;
(4) the making of Restricted Payments permitted by the
Restricted Payments covenant in the indenture;
(5) the creation or assumption of, or foreclosure thereon, a
Lien securing Indebtedness to the extent that such Lien does not
violate the "--Limitation on Liens" covenant above; and
(6) the consummation of any sale or series of related sales of
assets or properties of Waste Systems and any Restricted Subsidiary
having an aggregate fair market value for all such sales of less than
$1 million in any fiscal year.
"Average Life" means, as of the date of determination, concerning any
Indebtedness or Preferred Stock, the quotient obtained by dividing (a) the sum
of the product of the numbers of years, rounded upwards to the nearest month,
from the date of determination to the dates of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment
regarding such Preferred Stock multiplied by the amount of such payment by (b)
the sum of all such payments.
"Business Day" means any day except Saturday, Sunday and any day on
which banks in The City of New York are required or permitted by law or
executive order to close.
"Capital Lease Obligation" means, with respect to any Person, an
obligation that is required to be classified and accounted for as a capital
lease for financial reporting purposes in accordance with GAAP, and the amount
of Indebtedness represented by such obligation shall be the capitalized amount
of such obligation determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease before the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
partnership interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in, however designated, the equity of such
Person, including any Preferred Stock, but excluding debt securities convertible
into such equity.
"Cash Equivalents" means:
(a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued
by any agency thereof and backed by the full faith and credit of the
United States;
(b) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having one
of the two highest ratings obtainable from either Standard & Poor's
Rating Services ("Standard & Poor's") or Moody's Investors Service,
Inc.
("Moody's");
(c) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from Standard & Poor's or at least P-1 from
Moody's;
(d) certificates of deposit or bankers' acceptances or, with
regard to foreign banks, similar instruments, maturing within one year
from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the
District of Columbia or any United States branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus
of not less than $200 million;
(e) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (a)
above entered into with any bank meeting the qualifications specified
in clause (d) above; and
(f) investments in money market funds which invest
substantially all their assets in securities of the types described in
clauses (a) through (e) above.
"Change of Control" means the occurrence of any of the following events:
(1) any "person" or "group," as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, is or becomes the
"beneficial owner," as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (1) such person
or group shall be deemed to have "beneficial ownership" of all shares
that any said person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time,
directly or indirectly, of more than 50% of the total voting power of
the outstanding Voting Stock of Waste Systems; or
(2) individuals who on the Closing Date constitute the board
of directors, together with any new or successor directors whose
election by the board of directors or whose nomination by the board of
directors for election by Waste Systems's stockholders was approved by
a vote of at least two-thirds of the members of the board of directors
on the date of their election or nomination, cease for any reason to
constitute a majority of the members of the board of directors then in
office; or
(3) the sale, lease or other transfer, in one transaction or a
series of related transactions, of all or substantially all of the
assets of Waste Systems and its Restricted Subsidiaries to any person
or group, as so defined, excluding any such sale, lease or other
transfer to or among Waste Systems's Restricted Subsidiaries.
"Closing Date" means the date on which the Old Senior Notes were
originally issued under the indenture.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person for any period, the ratio of Adjusted EBITDA of such Person for such
period to the Consolidated Fixed Charges of such Person for such period;
provided, however, that:
(1) if Waste Systems or any Restricted Subsidiary has incurred
any Indebtedness since the beginning of such period and through the
date of determination of the Consolidated Fixed Charge Coverage Ratio
that remains outstanding or if the transaction giving rise to the need
to calculate Consolidated Fixed Charge Coverage Ratio is an incurrence
of Indebtedness or both, the Adjusted EBITDA and Consolidated Fixed
Charges for such period shall be calculated after giving effect on a
pro forma basis to
(A) such Indebtedness as if such Indebtedness had
been incurred on the first day of such period, provided that
if such Indebtedness is incurred under a revolving credit
facility or similar arrangement or under any predecessor
revolving credit or similar arrangement only that portion of
such Indebtedness that constitutes the one year projected
average balance of such Indebtedness, as determined in good
faith by the board of directors of Waste Systems, shall be
deemed outstanding for purposes of this calculation, and
(B) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period;
(2) if since the beginning of such period any Indebtedness of
Waste Systems or its Restricted Subsidiaries has been repaid,
repurchased, defeased or otherwise discharged, other than Indebtedness
under a revolving credit or similar arrangement unless such revolving
credit Indebtedness has been permanently repaid and the underlying
commitment terminated and not replaced, Consolidated Fixed Charges for
such period shall be calculated after giving pro forma effect thereto
as if such Indebtedness had been repaid, repurchased, defeased or
otherwise discharged on the first day of such period;
(3) if since the beginning of such period Waste Systems or any
of its Restricted Subsidiaries shall have made any Asset Sale, Adjusted
EBITDA for such period shall be reduced by an amount equal to the
Adjusted EBITDA, if positive, attributable to the assets which are the
subject of such Asset Sale for such period or increased by an amount
equal to the Adjusted EBITDA, if negative, attributable to it for such
period, the denominator in Consolidated Fixed Charge Coverage Ratio
shall be Consolidated Fixed Charges for such period
(A) reduced by an amount equal to the Consolidated
Fixed Charges attributable to any Indebtedness of Waste
Systems or any of its Restricted Subsidiaries repaid,
repurchased, defeased or otherwise discharged with respect to
Waste Systems and its continuing Restricted Subsidiaries in
connection with such Asset Sale for such period, or if the
capital stock of any Restricted Subsidiary is sold, the
Consolidated Interest for such period directly attributable to
the Indebtedness of Restricted Subsidiary to the extent Waste
Systems and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale, and
(B) increased by interest income attributable to the
assets which are the subject of such Asset Sale for such
period;
(4) if since the beginning of such period Waste Systems or any
of its Restricted Subsidiaries, by merger or otherwise, shall have made
an Investment in any Restricted Subsidiary, or any Person which becomes
a Restricted Subsidiary as a result thereof, or an acquisition of
assets occurring in connection with a transaction causing a calculation
to be made hereunder which constitutes all or substantially all of an
operating unit of a business, Adjusted EBITDA and Consolidated Fixed
Charges for such period shall be calculated after giving pro forma
effect thereto, including the incurrence of any Indebtedness, as if
such Investment or acquisition occurred on the first day of such
period; and
(5) if since the beginning of such period any Person, that
subsequently became a Restricted Subsidiary of Waste Systems or was
merged with or into Waste Systems or any other Restricted Subsidiary
since the beginning of such period, shall have made any Asset Sale,
Investment or acquisition of assets that would have required an
adjustment according to clause (3) or (4) above if made by Waste
Systems or a Restricted Subsidiary during such period, Adjusted EBITDA
and Consolidated Fixed Charges for such period shall be calculated
after giving pro forma effect thereto as if such Asset Sale, Investment
or acquisition had occurred on the first day of such period.
For the purposes of this definition, whenever pro forma effect is to be given to
an acquisition of assets, the amount of income or earnings in relation to and
the amount of Consolidated Fixed Charges associated with any Indebtedness
incurred in connection with an acquisition of assets, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
officer of Waste Systems. If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest expense on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period.
"Consolidated Fixed Charges" means, with respect to any period without
duplication, the sum of:
(1) the amount that in conformity with GAAP would be set forth
opposite the caption "interest expense" or any like caption on the
consolidated statement of operations of Waste Systems and its
Restricted Subsidiaries for such period, including, without limitation,
(A) amortization of debt discount,
(B) the net cash payments, if any, under interest
rate contracts, including amortization of discounts,
(C) the interest portion of any deferred payment obligation,
(D) accrued interest; plus
(2) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by Waste Systems
and its Restricted Subsidiaries during such period, of Waste Systems
and its Restricted Subsidiaries; plus
(3) all cash dividends paid during such period by Waste
Systems and its Restricted Subsidiaries concerning any Preferred Stock
and Disqualified Stock, in each case as determined on a consolidated
basis in accordance with GAAP; plus
(4) all interest on any Indebtedness of any person guaranteed
by Waste Systems or any of its Restricted Subsidiaries; provided, that
Consolidated Fixed Charges shall not include (x) the amortization of
debt issuance costs and (y) the fixed charges of a Restricted
Subsidiary to the extent, and in the same proportion, that the net
income of such Restricted Subsidiary was excluded in calculating
Consolidated Net Income pursuant to clause (5) of the definition
thereof for such period.
"Consolidated Net Income" means, with respect to any period, the net
income, or loss, of Waste Systems and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP, adjusted to
the extent included in calculating such net income, or loss, by excluding,
without duplication,
(1) extraordinary gains and losses;
(2) the portion of net income, or loss, of Waste Systems and
its Restricted Subsidiaries allocable to interests in unconsolidated
Persons or Unrestricted Subsidiaries, except that Waste Systems's
equity in the net income of such Person or Subsidiary shall be included
in Consolidated Net Income to the extent of the amount of dividends or
distributions actually paid to Waste Systems or its Restricted
Subsidiaries by such Person or Subsidiary during such period;
(3) net income, or loss, of any Person combined with Waste
Systems or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period before the date of
combination;
(4) net gain or loss in respect of any sale, transfer or
disposition of assets, including without limitation, pursuant to sale
and leaseback transactions, other than in the ordinary course of
business; and
(5) the net income, but not the net loss, of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income to Waste
Systems is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to the Restricted Subsidiary or its stockholders,
other than pursuant to the Senior Notes or the indenture.
"Credit Facility" means the Credit Facility established under the
Business Loan Agreement dated September 11, 1998, with regards to which Waste
Systems is a guarantor, by and among Waste Systems Vermont Holdings, Inc. and
Waste Systems Pennsylvania Holdings, Inc. and The BankNorth Group, N.A.,
including collateral documents, instruments and agreements executed in
connection therewith and any amendments, supplements, substitutions,
qualifications, extensions, renewals, restatements, replacements, refinancings
or refunding thereof.
"Currency Agreement Obligations" means the obligations of any Person
under a foreign exchange contract, currency swap agreement or other similar
agreement or arrangement to protect such Person against fluctuations in currency
values.
"Default" means any event that is, or after the giving of notice or
passage of time or both would be, an Event of Default.
"Disqualified Stock" means:
(1) any Preferred Stock of any Restricted Subsidiary, and
(2) any class or series of capital stock of Waste Systems
that, either by its terms, or by the terms of any security into which
it is convertible or exchangeable or by contract or otherwise
(A) is, or upon the happening of an event or passage
of time would be, required to be redeemed before one year
after the final Stated Maturity of the Senior Notes;
(B) is redeemable at the option of the holder thereof
at any time before one year after such final Stated Maturity;
or
(C) at the option of the holder thereof, is
convertible into or exchangeable for debt securities at any
time before one year after such final Stated Maturity;
provided that any capital stock that would not constitute
Disqualified Stock but for provisions therein giving holders
thereof the right to cause the issuer thereof to repurchase or
redeem such capital stock upon the occurrence of an "asset
sale" or "change of control" occurring before the Stated
Maturity of the Senior Notes will not constitute Disqualified
Stock if the "asset sale" or "change of control" provisions
applicable to such capital stock are not more favorable to the
holders of such capital stock than the provisions contained in
the "Limitation on Asset Sales" covenant and "Change of
Control" described above and such capital stock specifically
provides that the issuer will not repurchase or redeem any
such stock according to such provision before Waste Systems's
repurchase of such Senior Notes as are required to be
repurchased in conformity with the "Limitation on Asset Sales"
covenant and "Change of Control" described above.
"EBITDA" means, with respect to any Person for any period, the sum of
Consolidated Net Income of such Person for such period plus
(a) the following to the extent deducted in calculating
such Consolidated Net Income:
(1) provision for taxes based on the net income or
profits of such Person;
(2) Consolidated Fixed Charges, including for this
purpose the amortization of debt issuance costs;
(3) consolidated depreciation and amortization,
calculated in accordance with GAAP; and
(4) any other non-cash charges, excluding any
non-cash items that represent an accrual of or reserve for
cash charges reasonably expected to be disbursed in any
subsequent period before the Stated Maturity of the Senior
Notes, deducted in computing Consolidated Net Income, minus
(b) non-cash items increasing Consolidated Net Income,
excluding any items which represent an accrual for cash receipts or the
reduction of required future cash disbursements reasonably expected to
be received or disbursed in a subsequent period before the Stated
Maturity of the Senior Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of Waste Systems or its
Restricted Subsidiaries in existence on the Closing Date plus any premium or
interest accrued thereon.
"GAAP" means generally accepted accounting principles in the United
States set forth in the Statements of Financial Accounting Standards and the
Interpretations, Accounting Principles Board Opinions and AICPA Accounting
Research Bulletins which are applicable as of December 31, 1998 except as
otherwise specified in this Prospectus.
"Guarantee" means any obligation, contingent or otherwise, of any
Person guaranteeing Indebtedness of another Person, including, without
limitation, obligations, agreements to purchase assets, securities or services,
to take-or-pay, or to maintain financial statement conditions, or similar
arrangements or agreements entered into for the purpose of assuring the obligee
of such Indebtedness of the payment thereof or to protect such obligee against
loss in respect thereof, in whole or in part, but excluding (a) endorsements of
negotiable instruments for collection or deposit in the ordinary course of
business, and (b) contingent obligations in connection with the sale or discount
of accounts receivable and similar paper.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication:
(1) the principal of and the premium, if any, on all
indebtedness of such Person for money borrowed or which is evidenced by
a note, bond, debenture or similar instrument for payment;
(2) all obligations of such Person under any conditional sale,
title retention or similar agreement in respect of the deferred or
unpaid purchase price of property or services acquired by such Person;
(3) all Capital Lease Obligations of such Person;
(4) all reimbursement obligations of such Person in respect of
letters of credit, bankers' acceptances or similar facilities issued or
created for the account of such Person;
(5) all net obligations of such Person under Interest Rate
Agreement Obligations or Currency Agreement Obligations of such Person;
(6) all liabilities of others of the kind described in the
preceding clauses (1), (2) or (3) secured by any Lien on any property
owned by such Person even though such Person has not assumed or become
liable for the payment of such liabilities; provided, however, the
amount of such Indebtedness for purposes of this definition shall be
limited to the lesser of the amount of Indebtedness secured by such
Lien or the value of the property subject to such Lien;
(7) all Disqualified Stock issued by such Person and all
Preferred Stock issued by a Restricted Subsidiary of such Person;
(8) the amount of every Capital Lease Obligation of such
Person; and
(9) to the extent not otherwise included, any Guarantee by
such Person of any other Person's Indebtedness or other obligations
described in clauses (1) through (8) above.
For purposes of this definition, the maximum fixed repurchase price of any
Disqualified Stock that does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were repurchased on any date on which Indebtedness is
required to be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Stock, such
fair market value will be determined in good faith by the board of directors of
the issuer of such Disqualified Stock. "Indebtedness" of Waste Systems and the
Restricted Subsidiaries shall not include:
(1) trade payables incurred in the ordinary course of
business; and
(2) contingent obligations incurred in connection with the
sale or discount of accounts receivable and similar paper in the
ordinary course of business.
The principal amount outstanding of any Indebtedness issued with original issue
discount is the accreted value of such Indebtedness and Indebtedness shall not
include any liability for federal, state, local or other taxes. Accrued
liabilities arising in the ordinary course of business and any liability for
federal, state or local taxes or other taxes owed by such person will not be
considered Indebtedness for purposes of this definition.
"Interest Rate Agreement Obligations" means, with respect to any
Person, the Obligations of such Person under (a) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and (b) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit to, including, without limitation, by way of
Guarantee or similar arrangement but excluding advances to customers and
employees in the ordinary course of business, capital contribution to, by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others, or any purchase or acquisition of
capital stock, bonds, notes, debentures or other similar instruments issued by,
such Person and shall include the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" and the "Limitation on Restricted Payments" covenant described
above,
(1) "Investment" shall include the fair market value of the
assets, net of liabilities, of any Restricted Subsidiary of Waste
Systems at the time that such Restricted Subsidiary of Waste Systems is
designated an Unrestricted Subsidiary and shall exclude the fair market
value of the assets, net of liabilities, of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary of Waste Systems; and
(2) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined by the board of directors in good
faith.
"Lien" means any mortgage, lien, statutory or otherwise, pledge,
charge, security interest or encumbrance of any kind upon or concerning any
property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired, whether or not filed, recorded or otherwise perfected under
applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in any asset and any filing of, or agreement to
give, any financing statement under the Uniform Commercial Code, or equivalent
statutes, of any jurisdiction. A Person will be deemed to own subject to a Lien
any property that such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Net Cash Proceeds" means, with respect to any Asset Sale by any
Person, the aggregate cash or cash equivalent proceeds thereof, including
payments in respect of deferred payment obligations when received in the form
of, or stock or other assets when disposed for, cash or cash equivalents, except
to the extent that such obligations are financed or sold with recourse to Waste
Systems or any Restricted Subsidiary, pursuant to, or monetization of, a note or
installment receivable or otherwise, net of the sum of:
(1) the amount of any Indebtedness, including Disqualified
Stock or Preferred Stock of a subsidiary, which is required to be
repaid by such Person or its Affiliates in connection with such Asset
Sale; plus
(2) all fees, commissions and other expenses incurred,
including without limitation, the fees and expenses of legal counsel
and investment banking, accounting, underwriting and brokerage fees and
expenses, by such Person in connection with such Asset Sale; plus
(3) provision for taxes, including income taxes, attributable
to the Asset Sale or attributable to required prepayments or repayments
of Indebtedness with the proceeds of such Asset Sale; plus
(4) any amounts reasonably to be provided by Waste Systems or
any Restricted Subsidiary, as the case may be, as a reserve in
accordance with GAAP against any liabilities associated with such Asset
Sale and retained by the seller after such Asset Sale, including,
without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale; plus
(5) amounts required to be paid to Persons, other than Waste
Systems or a Restricted Subsidiary, holding a beneficial interest in
the assets sold in such Asset Sale or to holders of minority interests
in a Restricted Subsidiary or other entity as a result of such Asset
Sale.
"Net Proceeds," with respect to any issuance or sale of capital stock,
means the proceeds, in cash, securities or property, with any securities or
property valued at fair market value, of the issuance or the net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Investment" means:
(1) an Investment in Waste Systems or a Restricted Subsidiary
or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, Waste
Systems or a Restricted Subsidiary; provided that such Person's primary
business is related, ancillary or complementary to the businesses of
Waste Systems and its Restricted Subsidiaries on the date of such
Investment;
(2) Cash Equivalents;
(3) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP;
(4) stock, obligations or securities received in satisfaction
of judgments;
(5) an Investment in any Person consisting solely of the
transfer to such Person of an Investment in another Person that is not
a Restricted Subsidiary;
(6) Investment Grade Securities;
(7) Interest Rate Agreements and Currency Agreements designed
solely to protect Waste Systems or its Restricted Subsidiaries against
fluctuations in interest rates or foreign currency exchange rates;
(8) Investments, not to exceed $10.0 million at any one time
outstanding, and for purposes of this clause (8) an Investment shall be
deemed to be outstanding in the amount of the excess, but not, in any
event, less than zero, of the amount of such Investment on the date or
dates made, less the return of capital to Waste Systems and its
Restricted Subsidiaries concerning such Investment,; and
(9) Investments, to the extent the consideration therefor
consists of capital stock, other than Disqualified Stock, of Waste
Systems or net cash proceeds from the sale of such capital stock, if
such capital stock was issued or sold within 90 days of the making of
such Investment.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" as applied to the capital stock of any Person means
capital stock of any class or classes, however designated, whether now
outstanding or issued after the Closing Date, which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person, over
capital stock of any other class of such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of Waste Systems or the Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
Waste Systems or any Restricted Subsidiary at any time after the Closing Date;
provided that:
(1) any security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is
created, collectively a "Security Agreement," shall be entered into
within 180 days after the purchase or substantial completion of the
construction of such assets and shall at all times be confined solely
to the assets so purchased or acquired, any additions and accessions
thereto and any proceeds therefrom;
(2) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in
connection with the purchase of additions and accessions thereto and
except in respect of fees and other obligations in respect of such
Indebtedness; and
(3) either
(a) the aggregate outstanding principal amount of
Indebtedness secured thereby, determined on a per asset basis
in the case of any additions and accessions, shall not at the
time such Security Agreement is entered into exceed 100% of
the purchase price to Waste Systems or any Restricted
Subsidiary of the assets subject thereto, or
(b) the Indebtedness secured thereby shall be with
recourse solely to the assets so purchased or acquired, any
additions and accessions thereto and any proceeds therefrom.
"Qualified Stock" of any Person means any and all capital stock of such
Person, other than Disqualified Stock.
"Restricted Investment" means an Investment by Waste Systems or a
Restricted Subsidiary in any Person other than a Restricted Subsidiary.
"Restricted Payment" has the meaning set forth under the covenant
entitled "Limitation on Restricted Payments."
"Restricted Subsidiary" means each direct or indirect subsidiary of
Waste Systems other than an Unrestricted Subsidiary.
"Stated Maturity" means, when used with respect to any Senior Note or
any installment of interest thereon, the date specified in such Senior Note as
the fixed date on which the principal of such Senior Note or such installment of
interest is due and payable and, when used with regard to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness or
any installment of interest thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness, including, without
limitation, secured Indebtedness, of Waste Systems or a subsidiary guarantor
which by its express terms is subordinated or junior in right of payment to the
Senior Notes or the subsidiary guarantee issued by such subsidiary guarantor, as
the case may be.
"Subsidiary" of a Person means any Person a majority of the voting
power of the Voting Stock of which is owned or controlled, directly or
indirectly, by such Person or by one or more other subsidiaries of such Person,
or by such Person and one or more other subsidiaries thereof.
"Subsidiary Guarantee" means a guarantee of the Senior Notes by a
Restricted Subsidiary in accordance with the provisions of the Indenture.
"Unrestricted Subsidiary" means any subsidiary of Waste Systems
designated as such by the board of directors of Waste Systems pursuant to and in
compliance with the covenant described under "--Limitation on Designation of
Unrestricted Subsidiaries" and any subsidiary of an Unrestricted Subsidiary. Any
such Designation may be revoked by a resolution of the board of directors of
Waste Systems delivered to the trustee, subject to the provisions of such
covenant.
"Voting Stock" of a Person means any class or classes of capital stock
of such Person then outstanding as to which the holders thereof are entitled
under ordinary circumstances, without regard to the occurrence of any
contingency, to vote in the election of directors, managers or trustees of such
Person.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
with respect to which all of the outstanding Voting Stock, other than directors'
qualifying shares, of which are owned, directly or indirectly, by Waste Systems.
BOOK-ENTRY; DELIVERY AND FORM
The Old Senior Notes were initially issued in the form of one
registered note in global form without coupons.
The Global Note and Depository Procedures
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes from time to time.
Waste Systems takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to discuss
these matters.
DTC has advised us that it is a:
o limited purpose trust company organized under the laws of the State
of New York,
o member of the Federal Reserve System,
o "clearing corporation" within the meaning of the Uniform Commercial
Code and
o "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities for its participants and facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Waste Systems expects that according to procedures established by DTC:
(1) upon the purchase of the Offered Senior Notes, Waste
Systems or its custodian will credit, on its internal system, the
principal amount of the individual beneficial interests purchased to
the respective accounts of persons who have accounts with such
depository; and
(2) ownership of beneficial interests in the note will be
shown on, and the transfer of such ownership will be effected only
through:
o records maintained by DTC or its nominee concerning interests
of persons who have accounts with DTC ("participants") and
o the records of participants concerning interests of persons
other than participants.
The accounts initially will be designated by or on behalf of the
purchasers of the Offered Senior Notes and ownership of beneficial interests in
the note will be limited to participants or persons who hold interests through
participants.
So long as DTC, or its nominee, is the registered owner or holder of
the notes, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by a global note for all purposes under
the indenture. No beneficial owner of an interest in a global note will be able
to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the indenture.
Payments of the principal of, premium, if any, and interest on, a
global note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of Waste Systems, the trustee or any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a global
note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest on a global note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global note as
shown on the records of DTC or its nominee. Waste Systems also expects that
payments by participants to owners of beneficial interests in the global note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary
way through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
certificated note for any reason, including to sell Senior Notes to persons in
jurisdictions which require physical delivery of the Senior Notes, or to pledge
such securities, the holder must transfer its interest in the global note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the indenture. Consequently, the ability to transfer Senior Notes or to
pledge Senior Notes as collateral will be limited to that extent. Transfers
between participants in Euroclear and Cedel will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
Senior Notes that are issued as described below under "certificated
notes," will be issued in registered definitive form without coupons. Upon
transfer of certificated notes, such certificated notes may, unless the global
note has previously been exchanged for certificated notes, be exchanged for an
interest in the global note representing the principal amount of notes being
transferred.
DTC has advised us that it will take any action permitted to be taken
by a holder of Senior Notes, including the presentation of Senior Notes for
exchange as described below, only at the direction of one or more participants
to whose account the DTC interest in the global note is credited and only in
respect of such portion of the aggregate principal amount of Senior Notes as to
which the participant or participants has or have given such direction. However,
if there is an event of default under the indenture, DTC will exchange the
global notes for certificated notes, which it will distribute to its
participants.
Although DTC has agreed to the preceding procedures to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither Waste Systems nor the trustee will have any
responsibility for the performances by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes
The old global note is exchangeable for definitive Old Senior Notes in
registered certificated form, and the new global note is exchangeable for
definitive New Senior Notes in registered certificated form, in case, if:
(1) DTC:
(a) notifies Waste Systems and the trustee that it is
unwilling or unable to continue as depositary for
the global note; or
(b) has ceased to be a clearing agency registered under
the Exchange Act;
and, in either case, Waste Systems fails to appoint a successor depository
within 90 days;
(2) Waste Systems, at our option, notifies the trustee in
writing that it elects to cause the issuance of the certificated notes;
or
(3) there shall have occurred and be continuing a default or
event of default with respect to the Senior Notes as defined in the
indenture.
In all cases, certificated notes delivered in exchange for a global
note or beneficial interests in the global note will be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
depositary, in accordance with its customary procedures, and will bear the a
restrictive legend, unless Waste Systems determines otherwise in compliance with
applicable law.
SELLING NOTEHOLDER
The following section provides information regarding the selling
noteholder. The selling noteholder has furnished this information to us and this
information is accurate to the best of our knowledge.
Aggregate Principal
Amount of
Offered Senior Notes
B-III Capital Partners, L.P.
c/o DDJ Capital Management, LLC
141 Linden Street
Wellesley, MA 02181 $22,500,000
DDJ Capital Management, LLC ("DDJ") serves as investment manager of
B-III Capital Partners, L.P. ("B-III"); and an affiliate of DDJ is the general
partner of B-III. Judy K. Mencher and David J. Breazzano, managing directors of
DDJ, serve as directors of Waste Systems. As of June 30, 1999, DDJ beneficially
owned 7,019,426 shares of common stock of Waste Systems, 44.5% of the
outstanding common stock.
PLAN OF DISTRIBUTION
This prospectus, as it may be amended or supplemented form time to
time, may be used by a broker-dealer in connection with resales of Offered
Senior Notes.
We will not receive any proceeds from any sale of Offered Senior Notes.
We will pay substantially all of the expenses incident to the registration of
the Offered Senior Notes, except for selling commissions.
Offered Senior Notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options in the Offered Senior Notes or a combination of the foregoing methods
of resale, at market prices prevailing at the time of resale, at prices related
to the prevailing market prices or negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
purchasers, or both, of any Offered Senior Notes.
The selling noteholders may offer their shares through public or
private transactions, in the Private Offering Resales and Trading through
Automated Linkages or "PORTAL" market and at prevailing market prices or at
privately negotiated prices.
The senior notes may be sold directly or through agents or
broker-dealers acting as principal or agent. The selling noteholders may engage
underwriters, brokers, dealers or agents, who may receive commissions or
discounts from the selling noteholders.
The selling noteholders and any underwriters, agents or broker-dealers
that participate with the selling noteholders in the distribution of the shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, and any commissions received by them and any profit on the resale of the
shares may be deemed to be underwriting commissions or discounts under the
Securities Act.
USE OF PROCEEDS
We will not receive any cash proceeds from the sale of the Offered
Senior Notes. We are making this exchange offer solely to satisfy our
obligations under our Senior Notes registration rights agreement.
The net proceeds to Waste Systems from the original issuance of the Old
Senior Notes and warrants to purchase an aggregate of 1,500,000 shares of Waste
Systems common stock, subject to adjustment, after deducting the original
offering expenses, were approximately $97.3 million. We have used and intend to
use the net proceeds as follows:
Apportioned Amount Use or Intended Use
$20.0 million repayment of all outstanding 13% Short Term Notes due June
30, 1999
10.0 repayment of BankNorth Group, N.A. bank credit facility
1.7 repayment of capital leases and other notes payable
2.8 repurchase of approximately 500,000 shares of common stock
from the Federal Deposit Insurance Company
1.45 redemption of $1.45 million principal amount of 10%
Convertible Subordinated Debentures due October 6, 2005
61.35 the acquisition of Cumberland Waste Service, Inc. and
Community Refuse Service, Inc. and future acquisitions, as
well as general corporate purposes, including working capital
$97.3 million Total
<PAGE>
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon
by Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Waste Systems as of December
31, 1998 and 1997 and for each of the years in the three-year period ended
December 31, 1998, appearing in the Waste Systems Annual Report on Form 10-K
incorporated by reference in this prospectus and the registration statement to
which it is a part, have been audited by KPMG LLP, independent certified public
accountants, and in reliance upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU MAY FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the Securities
and Exchange Commission covering the resale of the shares of common stock. This
prospectus, which is part of the registration statement, omits certain
information included in the registration statement. Statements made in this
prospectus as to the contents of any contract, agreement or other document are
not necessarily complete. Since this prospectus may not contain all the
information that you may find important, you should review the full text of
these documents. We have included copies of these documents as exhibits to our
registration statement.
We are currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance with its rules, we file annual, quarterly and other
information with the Securities and Exchange Commission. You can inspect and
copy at prescribed rates the reports and other information that we file with the
Securities and Exchange Commission at the public reference facilities maintained
by the Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and also at the regional offices of
the Securities and Exchange Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048 and the Citicorp Center at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. You may obtain information on
the operation of the public reference facilities by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
also maintains an internet web site at http://www.SEC.gov that contains reports,
proxy and information statements and other information. You can also obtain
copies of these materials from us upon request.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents and other materials, which we have filed with
the Securities and Exchange Commission, are incorporated and specifically made a
part of this prospectus by reference:
(1) Annual Report on Form 10-K for the fiscal year ended December
31, 1998, as amended by the Report on Form 10-K/A filed on
April 8, 1999, as further amended by the Report on Form 10-K/A
Amendment No. 2 filed on August 5, 1999;
(2) Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, as amended by the Report on Form 10-Q/A filed on August
5, 1999;
(3) Proxy Statement dated April 30, 1999; and
(4) Current Report on Form 8-K filed on March 12, 1999, Current
Report on Form 8-K filed on March 25, 1999, as amended by
Current Report on Form 8-K/A filed on May 24, 1999.
In addition, all documents that we file with the Securities and
Exchange Commission pursuant to sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus will be deemed
to be incorporated by reference into this prospectus and to be part of this
prospectus from the date of the filing of such documents with the Securities and
Exchange Commission. Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference in this prospectus will
be deemed to be modified or superseded for purposes of this prospectus if a
statement contained in this prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes that statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this prospectus.
This prospectus incorporates documents by reference that are not
presented in this prospectus or delivered herewith. Copies of these documents,
other than exhibits to these documents that are not specifically incorporated by
reference in this prospectus, are available without charge to each person to
whom a copy of this prospectus is delivered, upon the written or oral request of
that person. Requests for any information should be directed to Waste Systems
International, Inc., 420 Bedford Street, Suite 300, Lexington, Massachusetts
02420 (telephone number (781) 862-3000), attention: Chief Financial Officer.
<PAGE>
II-5
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized statement of all expenses
expected to be incurred in connection with the issuance and distribution of the
securities being registered (all of which are estimated, other than the filing
fee of the Securities and Exchange Commission):
Securities and Exchange Commission filing fee............. $ 6,255
Legal fees and expenses................................... 10,000
Accounting fees and expenses.............................. 2,500
Blue Sky fees and expenses................................ 500
Miscellaneous............................................. 0
-----------
Total.......................................... $ 19,225
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify a director, officer, employee or agent
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement in respect of or in successful defense of any action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
We have obtained directors' and officers' insurance providing benefits
aggregating $5 million. In addition, Article X of our Second Amended and
Restated Certificate of Incorporation, as amended (the "Charter"), provides that
directors or officers of Waste Systems, or others serving as a director or
officer of another corporation at our request, shall be indemnified to the
fullest extent permitted by the DGCL. Article X further provides that the
indemnification rights provided by such Article X shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any law,
agreement or vote of stockholders or disinterested directors or otherwise.
Article VII of the Charter further provides that no director shall be personally
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty by such person as a director, except to the extent that the
elimination or limitation of liability is not permitted under the DGCL as in
effect when such liability is determined. Any amendment or repeal of Article VII
by the stockholders or an amendment to the DGCL shall not adversely affect any
right or protection under such Article existing at the time of such amendment or
repeal with respect to any act or omission occurring prior to such amendment or
repeal of a person serving as a director at the time of such amendment or
repeal.
We have also entered into an indemnification agreement with one of our
directors, William B. Philipbar. The indemnification agreement requires us,
among other things, to indemnify Mr. Philipbar to the fullest extent permitted
by law and advance to Mr. Philipbar all related expenses. Under this agreement,
we must also indemnify and advance all expenses incurred by Mr. Philipbar
seeking to enforce his rights under the indemnification agreement, provided Mr.
Philipbar prevails. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by law, it provides additional
assurance to Mr. Philipbar that indemnification will be available because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or the stockholders to eliminate the rights it provides. It is the
position of the Commission that indemnification of directors and officers for
liabilities under the Securities Act is against public policy and unenforceable
pursuant to Section 14 of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
The following is a complete list of exhibits filed or incorporated by
reference as part of this prospectus.
Exhibit No. Description
1.1 Purchase Agreement, dated February 25, 1999, by and among First Albany
Corporation and Waste Systems International, Inc. and its subsidiaries
(incorporated by reference to Exhibit 1.1 of the company's Current Report
on Form 8-K, dated March 2, 1999).
4.1 Indenture, dated as of March 2, 1999, between Waste Systems International,
Inc. and IBJ Whitehall Bank & Trust Company, including a form of the
11 1/2% Senior Note due 2006 (incorporated by reference to Exhibit 4.1 of
the Company's Current Report on Form 8-K, dated March 2, 1999).
4.2 Note Registration Rights Agreement, dated as of March 2, 1999 by and among
Waste Systems International, Inc. and its subsidiaries and First Albany
Corporation (incorporated by reference to Exhibit 4.3 of the company's
Current Report on Form 8-K, dated March 2, 1999)
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the securities
being registered.
12.1 Statement re: Computation of Ratios (incorporated by reference to Exhibit
12.1 to the Company's Registration Statement on Form S-4 File No.
333-81341).
23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1).
23.2 Consent of KPMG LLP, Independent Accountants.
24.1 Powers of Attorney (included on signature pages II-4 and II-5 hereto).
25.1 Statement of Eligibility of Trustee (incorporated by reference to Exhibit
25.1 to the Company's Registration Statement on Form S-4 File No.
333-81341).
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Lexington, Commonwealth of
Massachusetts, on this 5th day of August, 1999.
WASTE SYSTEMS INTERNATIONAL, INC.
By: /s/ Robert Rivkin
Robert Rivkin
Executive Vice President_Acquisitions,
Chief Financial Officer, Secretary,
Treasurer and Director (Principal
Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Waste Systems International, Inc. hereby constitute Robert Rivkin,
our true and lawful attorney with full power to him to sign for us and in our
names in the capacities indicated below, the registration statement filed
herewith and any and all amendments to said registration statement, and
generally to do all such things in our names and in our capacities as officers
and directors to enable Waste Systems International, Inc. to comply with the
provisions of the Securities Act of 1933 and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorney, to said registration statement and any and
all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
Date: August 5, 1999 By: /s/ Philip Strauss
------------------------
Philip Strauss
Chairman, Chief Executive Officer
and President
(Principal Executive Officer)
Date: August 5, 1999 By: /s/ Robert Rivkin
------------------------
Robert Rivkin
Executive Vice President_
Acquisitions, Chief Financial
Officer, Secretary, Treasurer and
Director (Principal Financial and
Accounting Officer)
Date: August 5, 1999 By: /s/ Jay J. Matulich
------------------------
Jay J. Matulich_Director
Date: August 5, 1999 By: /s/ David J. Breassano
------------------------
David J. Breazzano_Director
Date: August 5, 1999 By: /s/ Charles Johnston
------------------------
Charles Johnston_Director
Date: August 5, 1999 By: /s/ Judy K. Mencher
-------------------------
Judy K. Mencher_Director
Date: August 5, 1999 By: /s/ William B. Philipbar
-------------------------
William B. Philipbar_Director
<PAGE>
CO-REGISTRANT SIGNATURES
Pursuant to the requirements of Securities Act, each of the
co-registrants listed on Footnote (A) hereto certifies that it has reasonable
grounds to believe that it meets all the requirements for filing on Form S-4 and
it has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Lexington, Commonwealth of
Massachusetts, on this 5th day of August, 1999.
On behalf of each of the Co-Registrants
listed on Footnote (A) hereto.
WASTE SYSTEMS INTERNATIONAL, INC.
By: /s/ Robert Rivkin
Robert Rivkin
Executive Vice President_Acquisitions,
Chief Financial Officer, Secretary,
Treasurer and Director (Principal
Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Waste Systems International, Inc. hereby constitute Robert Rivkin,
our true and lawful attorney with full power to him to sign for us and in our
names in the capacities indicated below, the registration statement filed
herewith and any and all amendments to said registration statement, and
generally to do all such things in our names and in our capacities as officers
and directors to enable Waste Systems International, Inc. to comply with the
provisions of the Securities Act of 1933 and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorney, to said registration statement and any and
all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
Date: August 5, 1999 By: /s/ Philip Strauss
-------------------
Philip Strauss
Chairman, Chief Executive Officer and
President (Principal Executive Officer)
Date: August 5, 1999 By: /s/ Robert Rivkin
-------------------
Robert Rivkin
Executive Vice President_Acquisitions,
Chief Financial Officer, Secretary,
Treasurer and Director (Principal
Financial and Accounting Officer)
Date: August 5, 1999 By: /s/ Jay J. Matulich
-------------------
Jay J. Matulich_Director
Date: August 5, 1999 By: /s/ David J. Breassano
----------------------
David J. Breazzano_Director
Date: August 5, 1999 By: /s/ Charles Johnston
-----------------------
Charles Johnston_Director
Date: August 5, 1999 By: /s/ Judy K. Mencher
------------------------
Judy K. Mencher_Director
Date: August 5, 1999 By: /s/ William B. Philipbar
------------------------
William B. Philipbar_Director
<PAGE>
3
Exhibit 5.1
August 4, 1999
Waste Systems International, Inc.
420 Bedford Street, Suite 300
Lexington, MA 02420
Re: Legality of $22,500,000 Aggregate Principal Amount of
11 1/2% Senior Notes due 2006 to be Registered Pursuant to
Registration Statement on Form S-3.
Ladies and Gentlemen:
This opinion is delivered in our capacity as counsel to Waste Systems
International, Inc., a Delaware corporation (the "Company"), in connection with
the preparation and filing with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), of a registration
statement on Form S-3 (the "Registration Statement") relating to $22,500,000
aggregate principal amount of 11 1/2% Senior Notes due 2006 (the "Senior Notes")
authorized for issuance under the Company's Second Amended and Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation").
As counsel for the Company, we have examined the Indenture dated as of
March 2, 1999, between the Company, its subsidiaries and IBJ Whitehall Bank &
Trust Company, as trustee, (the "Indenture"), the Registration Statement and the
prospectus contained therein, the Certificate of Incorporation and the Bylaws of
the Company, each as presently in effect, and such records of corporate
proceedings of the Company as we have deemed to be material and such other
certificates, receipts, records, and other documents as we have deemed necessary
or appropriate for the purposes of this opinion.
The opinions expressed below are qualified to the extent that (a) the
validity or enforceability of any provision of the Senior Notes and the
Indenture or any rights granted thereunder may be subject to or affected by any
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
similar law relating to or affecting the rights of creditors generally, (b) the
remedy of specific performance or any other equitable remedy may be unavailable
in any jurisdiction or may be withheld as a matter of judicial discretion, and
(c) general principles of equity, including without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, may applied in the
exercise of judicial discretion in construing or enforcing the provisions of any
instrument or document (regardless of whether enforcement is sought in a
proceeding in equity or at law); in addition, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us, and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. We also
have assumed, and rely upon such assumption, without investigation, that all
documents, certificates, warranties and covenants on which we have relied in
rendering the opinion set forth below and that were given or dated earlier than
the date of this letter continue to remain accurate, insofar as relevant to the
opinions set forth herein, from such earlier date, through and including the
date of this letter.
We express no opinion concerning the laws of any jurisdictions other
than the laws of the United States of America, The Commonwealth of Massachusetts
and the Delaware General Corporation Law.
Based upon the foregoing, we are of the opinion that the Senior Notes
have been duly authorized, executed and delivered by the Company and constitute
valid and binding obligations of the Company, and the holders thereof are
entitled to the benefits of the Indenture, subject to the qualifications stated
above.
The foregoing assumes that all requisite steps will be taken to comply
with applicable requirements of state laws regulating the offer and sale of
securities.
We consent to being named as counsel to the Company in the Registration
Statement, to the references in the Registration Statement to our firm and to
the inclusion of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our report incorporated herein by reference
and to the reference to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG LLP
KPMG LLP
Boston, Massachusetts
August 4, 1999
