SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-20868
UNITED WASTE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3532338
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Four Greenwich Office Park, Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (203) 622 3131
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of class
Common Stock, $.001 par value
8% Cumulative Convertible Preferred
Stock, $.001 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X]Yes No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10K. [X]
As of March 12, 1997, there were 42,641,771 shares of the
registrant's common stock outstanding. The aggregate market
value of the common stock held by non-affiliates of the
registrant at March 12, 1997 was approximately $1,722,376,000.
The aggregate market value was calculated by using the closing
price of the stock as of that date on the Nasdaq Stock Market.
Documents incorporated by reference: Certain sections of the
registrant's Proxy Statement to be filed pursuant to Regulation
14A under the Securities Exchange Act of 1934 within 120 days of
the end of the registrant's fiscal year are incorporated by
reference into Part III of this Form 10-K.
FORM 10-K REPORT INDEX
Page
PART I
Item 1 Business . . . . . . . . . . . . . . . . . . . . . . 1
Item 2 Properties . . . . . . . . . . . . . . . . . . . . . 29
Item 3 Legal Proceedings. . . . . . . . . . . . . . . . . . 30
Item 4 Submission of Matters to a Vote of Security Holders. 33
PART II
Item 5 Market for the Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . 34
Item 6 Selected Financial Data. . . . . . . . . . . . . . . 35
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 41
Item 8 Financial Statements and Supplementary Data. . . . . 53
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . 91
PART III
Item 10 Directors and Executive Officers of the Registrant . 92
Item 11 Executive and Director Compensation. . . . . . . . . 92
Item 12 Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . 92
Item 13 Certain Relationships and Related Transactions . . . 92
PART IV
Item 14 Exhibits, Financial Statements and Schedule and
Reports on Form 8-K. . . . . . . . . . . . . . . . . 93<PAGE>
Unless otherwise indicated, the terms the "Company" and "United
Waste Systems" refer collectively to United Waste Systems, Inc.
and its subsidiaries.
Certain statements contained in this report are forward-looking
in nature. These statements are generally identified by the
inclusion of phrases such as "the Company expects," "the Company
anticipates," "the Company believes," "the Company estimates,"
and other phrases of similar meaning. Whether such statements
ultimately prove to be accurate depends upon a variety of factors
that may affect the business and operations of the Company.
PART I
Item 1. Business
General
United Waste Systems provides integrated solid waste
management services to commercial, industrial and residential
customers in 20 states. These services include nonhazardous
landfill operations, waste collection services, waste reuse and
reduction programs (such as composting and recycling) and related
environmental services. The Company has completed approximately
170 acquisitions of solid waste businesses since its formation in
July 1989, including over 90 completed since January 1, 1996.
The Company currently operates 36 nonhazardous landfill
operations (including 14 that it operates on behalf of
municipalities), 61 waste collection companies that have over
2,700 collection vehicles and trailers and serve over 850,000
customers, and 67 waste transfer stations (including seven that
it operates on behalf of municipalities).
The Company generally targets regions in which it has the
potential to establish a significant position. The Company
believes that this potential is greatest in regions where there
are few, if any, well capitalized and established waste
management companies present and where demand for integrated
waste management services is expected to increase. The Company
has succeeded in establishing and maintaining a significant
position in a majority of the geographic regions in which it
currently operates.
The Company's objective is to continue to expand through a
combination of new acquisitions and internal growth. The focus
of the Company's acquisition program at present is to capitalize
on opportunities around its existing operating regions that will
create synergies and efficiencies, as well as to selectively
enter several new regions annually. The Company may also
selectively consider acquisition or consolidation opportunities
involving other public companies or large privately-held
companies. The Company's strategy for improving internal growth
is to consolidate and integrate operations, improve operating
efficiencies, provide high levels of customer service, market to
new customers and maintain strict cost controls.
The Company on an ongoing basis reevaluates its strategy in
light of changing market, economic, regulatory and other relevant
conditions and considerations. As a result, the Company, from
time to time, may modify certain aspects of its strategy.
Industry Background
In the United States, landfilling is at present the most
common means of disposing of municipal solid waste ("MSW"), which
consists primarily of refuse and garbage from households and
commercial establishments. In addition, landfilling is one of
the means of disposing of certain special waste. Special waste,
some types of which may require special handling, consists of all
waste not regulated as hazardous waste under federal or state
laws other than MSW and may include asbestos, construction and
demolition materials, petroleum-contaminated soil, incinerator
ash, sewage sludge, foundry sands and industrial sludges.
In October 1991, the Environmental Protection Agency (the
"EPA") adopted new regulations under Subtitle D of the Resource
Conservation and Recovery Act of 1976 (the "Subtitle D
Regulations"), which were generally effective on October 9, 1993
(except for new financial assurance requirements which are
scheduled to become effective April 9, 1997). The Subtitle D
Regulations specify design, siting, operating, monitoring,
closure and financial requirements for landfill operations and,
among other things, require upgraded or new composite landfill
liners, leachate collection and treatment, groundwater and
methane gas monitoring, stricter siting and locational criteria,
closure and extended post-closure requirements and financial
assurances (such as a surety bond) that the owner or operator can
meet certain of these obligations. Each state is required to
revise its applicable solid waste regulations or programs to meet
the requirements of the Subtitle D Regulations or such
requirements automatically will be imposed by the EPA. Many
states have already adopted regulations or programs as stringent
as, or more stringent than, the Subtitle D Regulations, including
certain of those in which the Company's landfills are located.
The Company believes that in recent years there has been a
trend towards consolidation of landfill ownership and that a
similar trend is emerging in the solid waste collection industry,
which historically has been characterized by numerous small
companies. The Company believes that these trends will continue
and are the result of several factors:
- - The Subtitle D Regulations and related state
regulations and programs have significantly
increased the amount of capital and the technical
expertise required in order to own and operate a
landfill. As a result, many landfill operators
that lack the required capital or expertise are
electing to sell their landfills, as an
alternative to closing them.
- - A number of municipalities are electing to
privatize their municipal landfills as an
alternative to funding the changes to these
landfills that are required in order to comply
with the Subtitle D Regulations and related state
regulations and programs.
- - As a result of heightened sensitivity to
environmental concerns by many communities, it is
becoming increasingly necessary in many markets
for collection companies to provide waste reuse
and reduction programs, such as recycling and
composting, in addition to conventional waste
collection services. This development, as well as
more stringent bonding requirements being imposed
on waste collection companies by various
municipalities, have increased the amount of
capital generally required for waste collection
operations, causing private collection companies
that lack the requisite capital to sell their
operations to better capitalized companies.
Acquisitions
Since it commenced operations in 1989, the Company has
completed the acquisition of approximately 170 solid waste businesses. The
Company has an experienced acquisition team, comprised of
operating, environmental, engineering, legal, financial and
accounting personnel, engaged in identifying and evaluating
acquisition opportunities and implementing the Company's
acquisition program.
The Company has established detailed pre-acquisition review
procedures for acquisition candidates, including legal,
financial, engineering, operational and environmental reviews.
The environmental review includes, where appropriate,
investigation of geologic, hydrogeologic and other site
conditions, past and current operations (including types of waste
deposited), design and construction records, permits, regulatory
compliance history, regulatory agency records, and available soil
sampling, groundwater and air monitoring results.
The Company frequently structures its landfill acquisitions
in a manner that makes the post-acquisition performance of the
acquired business a significant factor in establishing the
purchase price. Purchase price structures utilized by the
Company include contingent payments that are based upon the
achievement of specified development or permitting targets and/or
royalties that are based upon future revenues or use and/or
purchase price holdbacks pending verification of represented
revenues. In addition, in establishing the purchase price for a
landfill, the Company considers the extent to which capital
expenditures may be required in order to comply with the Subtitle
D Regulations or other regulations.
Acquisitions Completed in 1996
During 1996, the Company completed 79 acquisitions,
including 48 "tuck-in" acquisitions. (A tuck-in acquisition is
one in which the Company acquires a collection company's vehicles
and assumes the service rights and obligations relating to such
company's customers, which are then integrated into one of the
Company's existing collection operations). The table below
provides a summary description of the operations acquired by the
Company in 1996.
Type of Operation Number Acquired
Landfills 15(1)
Collection companies (excluding
tuck-in acquisitions) 31(2)
Transfer stations 28(3)
Collection tuck-in acquisitions 48
(1) These landfills are located in Arizona, California,
Colorado, Kentucky, Massachusetts, Michigan, New Mexico, and
North Dakota. These landfills include 10 which the Company
operates on behalf of municipalities.
(2) These collection companies are located in Arizona,
California, Colorado, Illinois, Kentucky, Maine,
Massachusetts, Michigan, Minnesota, New Mexico, North
Dakota, Rhode Island, and Wisconsin.
(3) These transfer stations are located in California, Colorado,
Illinois, Kentucky, Maine, Massachusetts, Michigan,
Minnesota, New Hampshire, North Dakota, and Rhode Island.
These transfer stations include three which the Company
operates on behalf of municipalities.
Letters of Intent
As of March 25, 1997, the Company has entered into 25
non-binding letters of intent relating to possible acquisitions and
is in discussions with a number of additional potential
acquisition candidates. In addition, the Company has an option
to purchase certain operations. These letters of intent and the
option relate to the possible acquisition by the Company of 27
nonhazardous solid waste collection companies, one nonhazardous
landfill operation and 11 transfer stations. Based upon
information provided to the Company in connection with its
preliminary investigation of these businesses, the Company
estimates that the aggregate annualized revenues of these
businesses is approximately $93 million. However, in view of the
preliminary nature of this estimate, there can be no assurance
that actual revenues will not differ. Furthermore, in view of
the fact that these letters of intent are non-binding and that
the Company has not completed its due diligence investigations
with respect to these potential acquisitions, the Company cannot
predict whether these letters of intent will lead to definitive
agreements or whether the terms of any such definitive agreements
will be the same as the terms contemplated by the letters of
intent.
Operations
The Company's waste management operations include the
ownership and operation of nonhazardous solid waste landfills;
waste collection services; waste reuse and reduction programs
(such as composting and recycling); and related environmental
services.
Landfills
The Company currently operates 36 landfills permitted to
receive nonhazardous solid waste. These include 22 landfill
operations that the Company owns and 14 that it operates on
behalf of municipalities. These landfills owned or operated by
the Company are located in Arizona, California, Colorado,
Illinois, Iowa, Kentucky, Massachusetts, Michigan, Mississippi,
Nevada, New Mexico, North Dakota, Pennsylvania, and West
Virginia.
The permitted waste streams at each of the Company's
landfills include both MSW and certain special waste (the type of
special waste varying from landfill to landfill), with the
exception of a landfill in Mississippi (where the permitted waste
streams are exclusively asbestos and associated waste) and a
landfill in Michigan (where the permitted waste streams are
exclusively construction and demolition debris). The waste
disposed of at the Company's landfills is provided by both its
own collection operations and by third party collection
operations. The Company's policy generally is to operate each of
its landfills in a manner that will first serve the waste
disposal needs of the local region in which the landfill is
located and then the waste disposal needs of other areas.
The landfills that the Company operates on behalf of
municipalities are operated pursuant to contracts. Under the
terms of these contracts, the Company is compensated for its
services either by being paid a fee by the municipality or by
having the right to retain a portion of the revenues of the
landfill. In 1996, the operations of municipal landfills by the
Company accounted for approximately 6% of the Company's total
revenues.
The 22 landfill operations that the Company owns and
currently operates include approximately 5,458 total acres of
land. Of such acres, approximately 1,802 acres are permitted
(including approximately 1,188 acres that are unused). Such
permitted acreage includes land on which disposal cells and
supporting facilities have already been constructed (including
acres that may have been filled or capped and are no longer
accepting waste) and land on which such cells and improvements
may be constructed based upon an approval issued by the state
generally authorizing the development or siting of a landfill on
the acreage. Although acreage is permitted, it may be necessary,
depending on a state's particular regulatory requirements, for
the Company to obtain additional authorizations prior to actually
constructing and/or operating each new disposal cell. Permitted
acreage does not reflect the volume (or "airspace") available for
disposal, since such acreage includes filled or capped areas and
since volume depends on vertical space as well as surface area.
The Company monitors the available permitted in-place
disposal capacity at each of its landfills on an ongoing basis
and evaluates whether to seek to expand this capacity. In making
this evaluation, the Company considers various factors, including
the volume of waste projected to be disposed of at the landfill,
the size of the unpermitted acreage available at the landfill,
the likelihood that the Company will be successful in obtaining
the necessary approvals and permits required for the expansion,
and the costs that would be involved in developing the expanded
capacity. See "Business-Environmental Regulations-Additional
Information" for information concerning certain recent
developments that will impact the issuance of certain new permits
and approvals in Massachusetts.
In addition to the landfills that it currently operates, the
Company owns one landfill in Massachusetts (the Hudson landfill)
that ceased accepting waste in mid 1995 because it had exhausted
available capacity. The Company presently has a permit to
construct additional capacity which is subject to resolution of
certain zoning variances. There can be no assurance, however,
that the Company will be successful in this regard.
Collection and Transfer Station Operations
The Company provides solid waste collection services to over
850,000 residential, commercial and industrial customers and, in
connection with providing these services, operates 67 transfer
stations. These services are currently being provided in Arizona,
California, Colorado, Illinois, Iowa, Kentucky, Maine,
Massachusetts, Michigan, Minnesota, New Hampshire, New Mexico,
New York, North Dakota, Pennsylvania, Rhode Island, Wisconsin,
and Vermont.
Residential collection services involve the curbside
collection of waste by collection vehicles and the transportation
of the waste to transfer stations, landfills and incinerators.
Residential collection services are typically provided either on
a subscription basis, where the individual household contracts
directly with the service provider, or on a municipal contract
basis, where a municipality contracts with a service provider to
provide collection services to all residences within a specified
area.
As part of its services to industrial and commercial
customers, the Company generally supplies these customers with
containers that range in size from 2 to 40 cubic yards. In the
case of commercial customers, the Company generally collects the
containers on a set schedule. In the case of industrial
customers, it may collect the containers either on a set schedule
or upon request, depending upon the arrangement with the
particular customer. Services to commercial and industrial
customers are typically provided under contracts. In the case of
commercial customers, the contract typically provides for a term
ranging from 1 to 3 years. In the case of industrial customers,
the contract may provide for temporary services (such as the
removal of waste from a construction site) or ongoing services
(such as the removal of sludge from a paper mill).
The Company provides specialized asbestos collection,
transportation and disposal services primarily to asbestos
removal companies. These services are provided in the eastern
part of the United States, primarily in Connecticut, Maryland,
Massachusetts, New York, Pennsylvania, and Virginia. As part of
these services, the Company supplies its customers with one or
more enclosed trailers in which the customer loads sealed bags of
asbestos-containing material. The Company then arranges for a
common carrier to haul the trailer to one of the Company's
disposal sites. All asbestos-containing material collected by
the Company is currently being disposed of at the Company's
landfills.
A transfer station is a central waste collection point where
collection vehicles can deposit waste collected from individual
households or commercial or industrial customers. Waste received
at a transfer station is transferred on a regular basis to larger
vehicles that transport the waste to disposal sites. The Company
uses its transfer stations in its own collection operations and
permits others to use them for a fee.
Waste Reuse and Reduction Programs
Waste reuse and reduction programs (such as recycling and
composting) are becoming increasingly important as a result of
heightened sensitivity to environmental concerns on the part of
many communities, as well as new state, local or regional plans
that are increasingly mandating these programs in response to
public demand. The Company currently provides several different
services in connection with these programs.
Recycling. The Company provides recycling services for
certain waste streams in conjunction with several of its
collection operations. These services include the following:
collection of recyclable waste at curbside on certain collection
routes; transfer station operations where recyclable waste is
separated from other waste and compacted and packaged for
possible sale to third parties; and providing a variety of
recycling services, including the segregated collection of paper,
cardboard boxes and construction debris for resale to paper
manufacturers and others.
Sludge Composting. The Company owns and operates a waste
water sludge composting plant located in Springfield,
Massachusetts. This facility encompasses a totally "in vessel"
sludge composting operation that was designed as an enclosed
system in order to prevent emissions from escaping into the
atmosphere. During 1992, the Company entered into a 20-year
service agreement with the City of Springfield under which the
Company treats sewage sludge generated at the Springfield
Regional Wastewater Treatment Facility.
Other Services
In May 1993, the Company completed the acquisition of
Northern A-1 Sanitation Services, Inc. ("Northern A-1"). In
addition to providing solid waste collection services, Northern
A-1 provides certain other environmental services in the Northern
Michigan area. These services include industrial waste and
sludge removal and handling; industrial facility cleaning;
underground storage tank removal; soil remediation; emergency
spill clean-up; and related environmental services.
Northern A-1 also provides limited hazardous waste
transportation services for disposal at third party disposal
facilities. Although the Company generally has not acquired, and
in the future does not intend to acquire, hazardous waste
businesses, the Company at present has determined to continue
Northern A-1's limited hazardous waste transportation service in
order to be able to continue to provide Northern A-1's customer
base with the full range of services to which they are
accustomed.
Competition
The solid waste collection and disposal business is highly
competitive and requires substantial amounts of capital. The
Company competes with numerous local and regional companies and,
in selected areas, with the large national waste management
companies. Some of these companies have significantly larger
operations and greater resources than the Company. The Company
also competes with those counties and municipalities that
maintain their own waste collection and disposal operations.
These counties and municipalities may have financial advantages
due to the availability to them of tax revenues and tax exempt
financing. The Company competes primarily by charging
competitive prices and offering quality service. Competitors may
reduce the price of their services in an effort to expand market
share or to win competitively bid municipal contracts.
Liability Insurance and Bonding
The Company's insurance coverage for environmental liability
is limited to (i) over-the-road environmental liability
protection for the transportation of asbestos-containing
material, (ii) contractors pollution liability insurance that
relates to certain of the environmental services provided by the
Company and (iii) certain other pollution liability insurance,
which insurance is the equivalent of self insurance because under
the terms thereof the Company is required to fully reimburse the
insurance company for any claims paid. The Company does not
carry additional insurance for environmental liability because
the Company believes that the cost of such insurance is high
relative to the coverage that it would provide. Due to the
limited nature of the Company's insurance coverage for
environmental liability, if the Company were to incur liability
for environmental damage, its business and financial condition
could be materially adversely affected. With the exception of
insurance coverage for environmental liability, the Company
carries a broad range of insurance for the protection of its
assets and operations. However, the Company's blanket insurance
policy, which covers workers compensation, automobile and general
liability, is subject to a deductible of $250,000 per incident.
From time to time the Company may be required to post a
performance bond or a bank letter of credit in connection with
municipal residential collection contracts and the operation or
closure of landfills. If the Company were to be unable to obtain
surety bonds or letters of credit in sufficient amounts or at
reasonable rates, it might be precluded from entering into
additional municipal collection contracts or obtaining or
retaining landfill operating permits.
Executive Officers of the Registrant
The following table sets forth certain information
concerning the Board of Directors and the executive officers of
the Company:
Name Age Positions
Bradley S. Jacobs 40 Chairman, Chief Executive
Officer and Director
Edward T. Sheehan 54 President & Chief Operating
Officer
John N. Milne 38 Vice Chairman, Senior Vice
President, Chief Acquisition
Officer, Treasurer, Secretary,
and Director
Michael J. Nolan 36 Chief Financial Officer
Richard A. Volonino 54 Executive Vice President
Robert P. Miner 47 Vice President, Acquisitions
G. Chris Andersen 57 Director
Lawrence J. Twill, Sr. 59 Director
Christian Weyer 72 Director
J. Bryan Williams, III 57 Director
Bradley S. Jacobs, the founder of the Company, has been a
senior executive officer and director of the Company since the
Company's incorporation in July 1989 and has served as the
Company's Chief Executive Officer during most of that period. He
has also served as Chairman since January 1992. From 1984 to
July 1989, Mr. Jacobs was the Chairman and Chief Operating
Officer of Hamilton Resources (UK) Ltd., an international trading
company. From 1979 to 1983, Mr. Jacobs was the Chief Executive
Officer of Amerex Oil Associates, Inc., an oil brokerage firm.
Edward T. Sheehan has been a senior executive officer of the
Company since October 1992 and currently serves as President and
Chief Operating Officer of the Company. From September 1990 to
April 1992, Mr. Sheehan was Senior Vice President and Chief
Financial Officer of Clean Harbors Corporation, a publicly-held
company engaged in the hazardous waste treatment business. From
1966 until 1990, Mr. Sheehan held several positions with the
General Electric Company. His duties included operating
responsibility for affiliates in Saudi Arabia, Spain, South
Africa, and Portugal, from 1983 to 1985. In addition, he was
Manager-Finance for GE Industry Sales and Services from 1987 to
1990 and Manager-Finance for Factory Automation Products Division
from 1986 to 1987. From 1985 to 1986, Mr. Sheehan served as
International Treasurer for the General Electric Company. Mr.
Sheehan has a bachelor's degree from Siena College.
John N. Milne has been a senior executive officer of the
Company since March 1990 and a director of the Company since
September 1991. He currently serves as the Vice Chairman, Senior
Vice President, Chief Acquisition Officer, Treasurer and
Secretary of the Company. Since joining the Company, he has had
primary responsibility for implementing the Company's acquisition
program. Mr. Milne has a master's degree in business
administration and a juris doctorate degree from the University
of Western Ontario. Mr. Milne also has a bachelor's degree in
engineering from the University of Waterloo in Ontario.
Michael J. Nolan has been Chief Financial Officer since
February 1994. From October 1992 to February 1994 he was Vice
President, Finance and from November 1991 to October 1992 he was
Vice President, Financial Analysis and Reporting. From 1985
until November 1991, Mr. Nolan was with the accounting firm of
Ernst & Young. While at Ernst & Young, Mr. Nolan served in
various positions, including senior audit manager. Mr. Nolan is
a Certified Public Accountant and received a bachelor's degree in
accounting from the University of Hartford.
Richard A. Volonino has been a senior executive officer of
the Company since November 1991 and currently serves as Executive
Vice President. From May 1988 to October 1991, Mr. Volonino held
various positions with Chambers Development Company, Inc.,
including Vice President, Operations from January 1990 to
September 1991 and Director of Landfills from September 1988 to
January 1990. From 1986 to December 1987, Mr. Volonino was a
District Manager with Laidlaw, Inc. Mr. Volonino has been
employed in the waste management business since 1964. Mr.
Volonino has a bachelor's degree in business from the University
of Bridgeport and an associate's degree in electrical and
mechanical engineering from New York City Community College.
Robert P. Miner has been a senior executive officer of the
Company since November 1994 and currently serves as Vice
President, Acquisitions. From November 1988 to October 1994, he
was a research analyst covering the pollution control industry
for PaineWebber Incorporated and from January 1987 to October
1988, he was a research analyst covering this industry for
Needham & Co. Prior to this, Mr. Miner held various managerial
positions in marketing, project management and process
engineering for General Electric Environmental Services, Inc.,
Stauffer Chemical Company, and OHM Corporation. Mr. Miner has a
bachelor's degree in chemical engineering from Clarkson
University and a master's degree in management from Pace
University.
G. Chris Andersen has been a director of the Company since
June 1995. Mr. Andersen is a principal of Andersen, Weinroth &
Co. a merchant banking firm founded in 1996. From 1990 through
1995, he was Vice Chairman of PaineWebber Incorporated. For 20
years prior to 1990, Mr. Andersen held senior executive positions
at various investment banking firms. Mr. Andersen received a
master's degree in business administration from Northwestern
University. Mr. Andersen is also a director of Terex
corporation, a publicly traded company that manufactures
construction equipment and truck trailers, Sunshine Mining
Company, a publicly traded company engaged in mining, and Headway
Corporate Resources, Inc., a publicly traded company providing
staffing services.
Lawrence J. Twill, Sr. has been a director of the Company
since November 1991. Mr. Twill is, and has been since March
1991, the President of Ashwood Capital, a private merchant bank.
From February 1990 to February 1991, he was a Managing Director
of Peers & Co., then a subsidiary of Kemper Securities, Inc., and
from June 1988 to February 1990, he served as Executive Vice
President, Investment Banking and a member of the Executive
Committee of Bateman Eichler, Hill Richards, a subsidiary of
Kemper Securities, Inc. Prior to June 1988, Mr. Twill was the
Chairman and Chief Executive Officer of Woolcott & Company, an
investment banking firm. Prior to this he was the President and
Chief Executive Officer of New York Air, Inc. He is also a
member of the Board of Directors of H. M. G. Worldwide, Inc., a
publicly-traded company engaged in the marketing of in-store
point-of-sale systems and displays. Mr. Twill has a bachelor's
degree in economics from Seton Hall University.
Christian Weyer has been a director of the Company since
June 1992. Mr. Weyer has been in the international banking
business for over 31 years and since 1985 to present, Mr. Weyer
has been President of Enerfin S.A., an international trade and
financial advisory firm. From May 1988 to December 1992, Mr.
Weyer was a member of senior management at Banque Indosuez in
Geneva, Switzerland, with responsibility for matters relating to
commercial banking, and from 1971 to 1985 held various senior
management positions at Banque Paribas and its affiliates
(including President of Banque Paribas (Suisse) in Geneva during
1984). Prior to 1971, Mr. Weyer held senior management positions
with Chase Manhattan Bank in Paris, France, and in Geneva,
Switzerland. Mr. Weyer is also a director of Cartier - Monde,
the holding company for the worldwide Cartier Group of companies,
and has held such position for over 18 years.
J. Bryan Williams, III has been a director of the Company
since November 1991. Mr. Williams has been a senior executive of
Mobil Oil Corporation since 1973 and is presently the General
Manager of Strategic Business Development and Government Affairs.
His responsibilities include the negotiation and administration
of Mobil's worldwide crude oil purchase and sales contracts as
well as the development of strategic international business
ventures for crude oil and refined products. Prior to joining
Mobil Oil Corporation, Mr. Williams was an attorney with the law
firm of Shearman & Sterling. Mr. Williams has a bachelor's
degree in international studies from the University of North
Carolina and a juris doctorate degree from New York University
School of Law.
Employees
At February 15, 1997, the Company employed approximately
3,100 employees, over 300 of whom were managers or professionals,
approximately 2,400 of whom were hourly paid employees involved
in collection, transfer and disposal operations and approximately
400 of whom were sales, clerical, data processing or other
administrative employees. Two collective bargaining agreements
relating to three separate locations cover 103 employees of the
Company. The Company is unable to predict what impact, if any,
there would be on its business and operations in the event that
in the future a significant number of additional employees were
to elect to be unionized. The Company believes that its
relations with its employees are good.
Environmental Regulations
The Company is subject to extensive and evolving
environmental laws and regulations that have been enacted in
response to technological advances and increased concern over
environmental issues. These regulations are administered by the
United States Environmental Protection Agency (the "EPA") and
various other federal, state and local environmental,
transportation, health and safety agencies. The Company believes
that there will continue to be increased regulation, legislation
and regulatory enforcement actions related to the solid waste
management, collection and disposal industry. In light of these
developments, the Company attempts to anticipate future
regulatory requirements that might be imposed and plans
accordingly to remain in compliance with the regulatory
framework.
In order to develop and operate a landfill, a composting
facility or transfer station, or other solid waste management
facility, the Company typically must go through several
governmental review processes and obtain one or more permits and
often zoning or other land use approvals. These permits and
zoning or land use approvals are difficult and time consuming to
obtain and are frequently opposed by various local elected
officials and citizens' groups. Once obtained, operating permits
generally must be periodically renewed and are subject to
modification and revocation by the issuing agency.
The Company's operation of solid waste management facilities
subject it to certain operational, monitoring, site maintenance,
closure and post-closure and financial assurance obligations
which change from time to time and which could give rise to
increased capital expenditures and operating costs. In
connection with the Company's acquisition of existing landfills,
it is often necessary to expend considerable time, effort and
money in complying with the governmental review and permitting
process necessary to maintain or increase the capacity of these
landfills. Governmental authorities have the power to enforce
compliance with these laws and regulations and to obtain
injunctions or impose civil or criminal penalties in the case of
violations. During the ordinary course of its operations, the
Company has from time to time received citations or notices from
such authorities that its operations are not in compliance with
certain applicable environmental laws and regulations. Upon
receipt of such citations or notices, the Company generally works
with the authorities in an attempt to resolve the issues raised
by such citations or notices. Failure to correct the problems to
the satisfaction of the authorities could lead to fines,
curtailed operations, remedial obligations or closure of a
landfill.
In order to transport solid waste, it is generally necessary
for the Company to possess one or more permits and approvals from
state or local agencies. These permits must also be periodically
renewed and are subject to modification and revocation by the
issuing agency. In addition, the Company's waste transportation
operations are subject to evolving and expanding laws and
regulations that impose operational, monitoring, training and
safety requirements.
The principal federal, state and local statutes and
regulations applicable to the Company's operations are as
follows:
The Resource Conservation and Recovery Act of 1976 ("RCRA").
RCRA regulates the generation, treatment, storage, handling,
transportation and disposal of solid waste and requires states to
develop programs to insure the safe disposal of solid waste.
RCRA divides solid waste into two groups, hazardous and
nonhazardous. Wastes are generally classified as hazardous
wastes if they (i) either (a) are specifically included on a list
of hazardous wastes or (b) exhibit certain hazardous
characteristics and (ii) are not specifically designated as
nonhazardous. Wastes classified as hazardous under RCRA are
subject to much stricter regulation than wastes classified as
nonhazardous. Among the wastes that are specifically designated
as nonhazardous waste are household waste and special waste.
These wastes, which will be accepted at the Company's landfills,
may contain substances that may be as toxic or prone to cause
contamination as some wastes classified and regulated as
hazardous.
In October 1991, the EPA adopted new regulations pursuant to
Subtitle D of RCRA (the "Subtitle D Regulations"). These new
regulations became generally effective in October 1993 (except
for new financial assurance requirements which are scheduled to
become effective April 9, 1997) and include location
restrictions, siting criteria, facility design standards,
operating criteria, closure and extended post-closure
requirements, financial assurance requirements, groundwater
monitoring requirements, groundwater remediation standards and
corrective action requirements. In addition, these new
regulations require that new landfill units meet more stringent
liner design criteria (typically, composite soil and synthetic
liners or two or more synthetic liners) designed to keep leachate
out of groundwater and have extensive collection systems to carry
away leachate for treatment prior to disposal. Groundwater wells
must also be installed at virtually all landfills to monitor
groundwater quality. The regulations also require, where
threshold test levels are present, that methane gas generated at
landfills be controlled in a manner that will protect human
health and the environment. Each state is required to revise its
landfill regulations to meet these requirements or such
requirements will be automatically imposed upon it by the EPA.
Each state is also required to adopt and implement a permit
program or other appropriate system to ensure that landfills
within the state comply with the Subtitle D criteria. Many
states have already adopted regulations or programs as stringent
as or more stringent than the Subtitle D Regulations, which were
first proposed in August 1988. All states in which the Company
operates landfills have adopted the required programs, have
submitted them to the EPA for approval and have received full or
partial EPA approval for their programs (except for Iowa which
was notified that its proposed program was incomplete and must be
resubmitted). The EPA has notified Iowa that its proposed
program was incomplete and must be resubmitted.
The Federal Water Pollution Control Act (the "Clean Water
Act"). The Clean Water Act establishes rules regulating the
discharge of pollutants from a variety of sources, including
solid waste disposal sites, into waters of the United States. If
runoff or collected leachate from the Company's landfills is
discharged into a water of the United States, the Clean Water Act
would require the Company to apply for and obtain a discharge
permit, conduct sampling and monitoring and, under certain
circumstances, reduce the pollutants in such discharge. Also,
virtually all landfills are required to comply with the new
federal storm water regulations, which are designed to prevent
possibly contaminated storm water from flowing into surface
waters. These regulations required that applications for
stormwater discharge permits be submitted by October 1992. The
Company is working with the appropriate regulatory agencies to
ensure that its facilities are in compliance with Clean Water Act
requirements, particularly as they apply to treatment and
discharge of leachate and storm water. The Company has secured
or has applied for the required discharge permits under the Clean
Water Act or comparable state-delegated programs. In those
instances where the Company's applications for discharge permits
are pending and a final discharge permit has not been issued, the
Company believes that it is substantially in compliance with
applicable substantive standards set by the respective states in
administering the Clean Water Act. To ensure compliance with the
Clean Water Act pretreatment and discharge requirements, the
Company has either installed wastewater treatment systems at its
facilities to treat its effluent to acceptable levels before
discharge or has arranged (or is arranging) to discharge its
effluent to municipal wastewater treatment facilities.
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("Superfund" or "CERCLA"). CERCLA
established a regulatory and remedial program intended to provide
for the investigation and cleanup of facilities from which there
has been, or is threatened, a release of any hazardous substance
into the environment. CERCLA's primary mechanism for remedying
such problems is to impose strict joint and several liability for
cleanup of facilities on current owners and operators of the
site, former owners and operators of the site at the time of the
disposal of the hazardous substances, as well as the generators
of the hazardous substances and the transporters who arranged for
disposal or transportation of the hazardous substances. The
costs of CERCLA investigation and cleanup can be very
substantial. Liability under CERCLA does not depend upon the
existence or disposal of "hazardous waste" but can also be
founded upon the existence of even very small amounts of many
hundreds of "hazardous substances" listed by the EPA, many of
which can be found in household waste. If the Company were to be
found to be a responsible party for a CERCLA cleanup, the
enforcing agency could hold the Company completely responsible
for all investigative and remedial costs even if others may also
be liable. CERCLA also authorized the imposition of a lien in
favor of the United States upon all real property subject to or
affected by a remedial action for all costs for which a party is
liable. The Company's ability to obtain reimbursement from
others for their allocable share of such costs would be limited
by the Company's ability to find other responsible parties and
prove the extent of their responsibility and by the financial
resources of such other parties. In the past, legislation has
been introduced in Congress to limit the liability of
municipalities and others under CERCLA as generators and
transporters of municipal solid waste. Although such legislation
has not been enacted, if it were to pass it would limit the
Company's ability to seek full contribution from municipalities
for CERCLA cleanup costs even if the hazardous substances that
were released and caused the need for cleanup at one of the
Company's facilities were generated by or transported to the
facility by a municipality.
Continued funding for implementation of RCRA, the Clean
Water Act and CERCLA is scheduled for reauthorization action in
Congress in 1997. Depending upon whether and how Congress acts,
it is possible that each of these laws may be changed in ways
that may significantly affect the Company's business. The
Company is closely monitoring the Congressional activities in
those areas that may impact its business.
The Clean Air Act. The Clean Air Act provides for
regulation, through state implementation of federal
requirements, of the emission of air pollutants from certain
landfills based upon the date of the landfill construction and
volume per year of emissions of regulated pollutants. The EPA
has recently promulgated new source performance standards
regulating air emissions of certain regulated pollutants (methane
and non-methane organic compounds) from municipal solid waste
landfills. The EPA has also issued regulations controlling the
emissions of particular regulated air pollutants from existing
municipal solid waste landfills. Landfills located in areas
designated as having air pollution problems may be subject to
even more extensive air pollution controls and emission
limitations. In addition, the EPA has issued standards
regulating the disposal of asbestos-containing materials.
Each of the federal statutes described above contains
provisions authorizing, under certain circumstances, the bringing
of lawsuits by private citizens to enforce the provisions of the
statutes.
The Hazardous Materials Transportation Act. The
transportation of hazardous waste is regulated both by the EPA
pursuant to RCRA and by the federal Department of Transportation
("DOT") pursuant to the Hazardous Materials Transportation Act
("HMTA"). These regulations are applicable to the limited
hazardous waste transportation services offered by one of the
Company's subsidiaries. See "Business -- Operations -- Other
Services." Pursuant to the HMTA, the DOT has enacted regulations
governing the transport of hazardous waste. These regulations
govern, among other things, packaging of the hazardous waste
during transport, labeling and marking requirements, and
reporting of and response to spills of hazardous waste during
transport. In addition, under both the HMTA and RCRA,
transporters of hazardous waste must comply with manifest and
record keeping requirements, which are designed to ensure that a
shipment of hazardous waste is properly identified and can be
tracked from its point of generation to point of disposal at a
permitted hazardous waste treatment, storage or disposal
facility.
The Occupation Safety and Health Act of 1970 ("OSHA"). OSHA
establishes employer responsibilities for worker health and
safety and authorizes the promulgation by the Occupational Safety
and Health Administration of occupation health and safety
standards, including the obligation to maintain a workplace free
of recognized hazards likely to cause death or serious injury, to
comply with adopted worker protection standards, to maintain
certain records, to provide workers with required disclosure and
to implement certain health and safety training programs.
Various of those promulgated standards may apply to the Company's
operations, including those standards concerning notices or
hazards, safety in excavation and demolition work, the handling
of asbestos and asbestos-containing materials, and worker
training and emergency response programs. The Company's
employees are trained to respond appropriately in the event there
is an accidental spill or release of packaged asbestos-containing
materials or other regulated substances during transportation or
landfill disposal.
State and Local Regulation. Each state in which the Company
now operates or may operate in the future has laws and
regulations governing the generation, storage, treatment,
handling, transportation and disposal of solid and hazardous
waste, water and air pollution and, in most cases, the siting,
design, operation, maintenance, closure and post-closure
maintenance of landfills and transfer stations. In addition,
many states have adopted "Superfund" statutes comparable to, and
in some cases more stringent than, CERCLA. These statutes impose
requirements for investigation and cleanup of contaminated sites
and liability for costs and damages associated with such sites,
and some provide for the imposition of liens on property owned by
responsible parties. Furthermore, many municipalities also have
ordinances, local laws and regulations affecting Company
operations. These include zoning and health measures that limit
solid waste management activities to specified sites or
activities, flow control provisions that direct the delivery of
solid wastes to specific facilities, laws that grant the right to
establish franchises for collection services and then put out for
bid the right to provide collection services, and bans or other
restrictions on the movement of solid wastes into a municipality.
Certain permits and approvals may limit the types of waste
that may be accepted at a landfill or the quantity of waste that
may be accepted at a landfill during a given time period. In
addition, certain permits and approvals, as well as certain state
and local regulations, may limit a landfill to accepting waste
that originates from specified geographic areas or seek to
restrict the importation of out-of-state waste or otherwise
discriminate against out-of-state waste. Generally, restrictions
on the importation of out-of-state waste have not withstood
judicial challenge. However, from time to time federal
legislation is proposed which would allow individual states to
prohibit the disposal of out-of-state waste or to limit the
amount of out-of-state waste that could be imported for disposal
and would require states, under certain circumstances, to reduce
the amounts of waste exported to other states. Although, such
legislation has not yet been passed by Congress, if this or
similar legislation is enacted, states in which the Company
operates landfills could act to limit or prohibit the importation
of out-of-state waste. Such state actions could adversely affect
landfills within those states that receive a significant portion
of waste originating from out-of-state.
In addition, certain states and localities may for economic
or other reasons restrict the exportation of waste from their
jurisdiction or require that a specified amount of waste be
disposed of at facilities within their jurisdiction. In 1994,
the United States Supreme Court held unconstitutional, and
therefore invalid, a local ordinance that sought to impose flow
controls on taking waste out of the locality. However, certain
state and local jurisdictions continue to seek to enforce such
restrictions through legislation or contractually and, in certain
cases, the Company may elect not to challenge such restrictions
based upon various considerations. In addition, the
aforementioned federal legislation that has from time to time
been proposed could allow states and localities to impose certain
flow control restrictions. These restrictions could result in
the volume of waste going to landfills being reduced in certain
areas, which may adversely affect the Company's ability to
operate its landfills at their capacity and/or affect the prices
that can be charged for landfill disposal services. These
restrictions may also result in higher disposal costs for the
Company's collection operations. If the Company were unable to
pass such higher costs through to its customers, the Company
results of operations could be adversely affected.
The permits or other land use approvals with respect to a
landfill, as well as state or local laws and regulations, may (i)
limit a landfill to accepting waste that originates from a
specified geographic area and/or (ii) specify the quantity of
waste that may be accepted at the landfill during a given time
period and/or (iii) specify the types of waste that may be
accepted at the landfill.
Additional Information. There has been an increasing trend at the
state and local level to mandate and encourage waste reduction at the source
and waste recycling and to prohibit or restrict the disposal of
certain types of solid wastes, such as yard wastes and tires, in
landfills. The enactment of regulations reducing the volume and
types of wastes available for transport to and disposal in
landfills could affect the Company's ability to operate its
facilities at their full capacity.
In the past, operations conducted on a portion of the
property owned by the Company at its Northern A-1 facility
involved the storage of brine. It is possible, although no
direct evidence exists, that such operations could have
contributed to existing regional brine contamination of the
shallow groundwater, which is the basis for the 1985 inclusion of
the regional area on the state's list of areas which require
further investigation and possible remedial activities. The
Company is not aware of any pending regulatory actions concerning
this contamination, or whether it has any potential liability
therefor.
The Company believes that an area of its Kelly Run landfill
in Pennsylvania which is no longer used for disposal may be the
source of contamination in the groundwater underlying the
landfill. To address this contamination, a groundwater
evaluation and abatement plan designed to control and remediate
the contamination from that area has been implemented and has
been approved by the State Regulatory Agency. Although this plan
and additional requirements concerning the Kelly Run landfill
have been incorporated into a March 1996 Consent Decree (which
has received court approval) between the Company and the State
Regulatory Agency, there can be no assurance that the Company
will be able to successfully implement such Consent Decree or
that additional requirements relating to this matter will not be
imposed in the future. The Company recently received from the
State Regulatory Agency in Pennsylvania a permit for development of an
approximately 48 acre expansion area at its Kelly Run landfill.
The Company intends to use this area to replace the existing
capacity which will be exhausted in mid-1997. The issuance of
this permit was recently appealed by certain parties on the
grounds that the criteria for the permit issuance was not
satisfied. The Company will vigorously contest this appeal,
although there can be no assurance on the final outcome.
The Massachusetts Department of Environmental Protection
(the "MDEP") imposed a moratorium in late 1995 on the review of
applications for landfill construction and expansion and has
proposed new, more stringent criteria to govern such permit
issuances after the moratorium is lifted. The MDEP has indicated
that the moratorium may be lifted in 1998, although there can be
no assurance of this. The Company is engaged in discussions with
the MDEP regarding the moratorium, which if continued to be
applied would delay regulatory review of the Company's permit
applications for new cell construction required at its Barre and
Holyoke landfills to replace the existing cells which might
otherwise be exhausted in 1998. There can be no assurance that
the Company will be successful in obtaining and maintaining in
effect the permits and approvals required for the successful
operation and growth of its business, including permits and
approvals required for the development of additional disposal
capacity needed to replace existing capacity that is exhausted.
The failure by the Company to obtain or maintain in effect a
permit or agreement significant to its business could adversely
affect the Company's business and financial condition. See
"Business-Factors that May Influence Future Results and Accuracy
of Forward-Looking Statements."
Factors that May Influence Future Results and Accuracy of
Forward-Looking Statements
The Company, in an effort to help keep its stockholders and
the public informed about the Company's operations, may from time
to time issue certain statements, either in writing or orally,
that contain or may contain forward-looking information.
However, actual results may differ materially from the Company's
expectations, statements or projections. Factors that could
cause actual results to differ from the Company's expectations,
statements or projections include the risks and uncertainties
relating to the Company's business described below.
Economic Conditions: The Company's business is affected by
general economic conditions. There can be no assurance that an
economic downturn will not result in a reduction in the volume of
waste being disposed of at the Company's operations and/or the
price that the Company can charge for its services.
Weather Conditions: Protracted periods of inclement weather
may adversely affect the Company's operations by interfering with
collection and landfill operations, delaying the development of
landfill capacity and/or reducing the volume of waste generated
by the Company's customers. In addition, particularly harsh
weather conditions may result in the temporary suspension of
certain of the Company's operations.
Competition: The solid waste collection and disposal
business is highly competitive and requires substantial amounts
of capital. The Company competes with numerous waste management
companies, a number of which have significantly larger operations
and greater resources than the Company. The Company also
competes with those counties and municipalities that maintain
their own waste collection and disposal operations. The counties
and municipalities may have financial advantages due to the
availability of tax revenues and tax exempt financings. In
addition, competitors may reduce the price of their services in
an effort to expand market share or to win competitively bid
municipal contracts.
Ongoing Capital Requirements: To the extent that cash on
hand, internally generated cash and cash available under the
Company's existing revolving credit facility are not sufficient
to provide the cash required for future operations, capital
expenditures, acquisitions, debt repayment obligations and/or
financial assurance obligations, the Company will require
additional equity and/or debt financing in order to provide such
cash. There can be no assurance, however, that such financing
will be available or, if available, will be available on terms
satisfactory to the Company. The Company intends to pay for
future acquisitions using cash, capital stock, assumption of
indebtedness and/or notes, although there can be no assurance
that the owners of the businesses that the Company may wish to
acquire will be willing to accept non-cash consideration in whole
or in part.
Dependence on Senior Management: The Company is highly
dependent upon its senior management team. The loss of the
services of any member of senior management may have a material
adverse effect on the Company. The Company does not maintain
"key man" life insurance with respect to members of senior
management.
Environmental and Land Use Matters: The Company is subject
to extensive and evolving environmental and land use laws and
regulations, which have become increasingly stringent as a result
of greater public interest in protecting the environment. These
laws and regulations affect the Company's business in many ways,
including those set forth below. See "Business Environmental
Regulations" for further information concerning the matters set
forth below.
In connection with most of its operations, the Company is
required to obtain and/or maintain in effect various permits and
other governmental approvals, including approvals relating to
zoning, land use and environmental matters. In addition, the
Company may be required to obtain similar permits and approvals
in order to expand its existing operations. These permits and
approvals are difficult, time consuming and costly to obtain and
maintain in effect and are frequently subject to community
opposition, opposition by various local elected officials or
citizens and other uncertainties. In addition, once obtained,
these permits and approvals may be subject to modification,
renewal or revocation by the issuing agency. Moreover, from time
to time, regulatory agencies may delay the review or grant of
these required permits or approvals or may modify the procedures
or increase the stringency of the standards applicable to its
review or grant of such permits or approvals. There can be no
assurance that the Company will be successful in obtaining and
maintaining in effect the permits and approvals required for the
successful operation and growth of its business (including
permits and approvals required to develop timely additional
disposal capacity to replace capacity that is exhausted). The
failure by the Company to obtain or maintain in effect a permit
significant to its business could adversely affect the Company's
business and financial condition.
The Company's operations are subject to and substantially
affected by extensive federal, state and local laws and
regulations, which govern environmental, permitting, zoning, land
use, health, safety and other matters. Compliance with these
laws and regulations require significant expenditures, and future
changes in these laws and regulations may materially increase the
amount of such required expenditures. In addition, such laws and
regulations may impose restrictions on operations that could
adversely affect the Company, such as limitations on the
expansion of disposal facilities or limitations on, or the
banning of, waste from out-of-state or locality or certain
categories of wastes.
There may be various adverse consequences to the Company in
the event that the Company fails to comply with applicable laws,
regulations or permits, in the event that a facility owned or
operated by the Company causes environmental damage or in the
event that waste transported by the Company causes environmental
damage at another site. Under certain circumstance, the Company,
as a successor owner, may also be responsible for any such
failure by a predecessor owner and/or for damage caused by a
predecessor owner. These adverse consequences may include
substantial monetary penalties; the need to undertake
investigatory or remedial activities; the need to curtail or
terminate the operations involved or affected; the revocation or
denial of permits or other approvals; the imposition of liability
on the Company in respect of any environmental damage at its
landfill sites or caused by its landfills or other facilities or
environmental damage at other sites associated with waste
transported by the Company; and criminal liability for the
Company or its employees. Any of the foregoing could adversely
affect the Company's business and financial condition.
Limits on Insurance Coverage: As described under
"Business-Liability Insurance and Bonding," the Company's insurance for
environmental liability is very limited because the Company
believes that the cost for such insurance is high relative to the
coverage it would provide. Due to the limited nature of the
Company's insurance coverage for environmental liability, if the
Company were to incur liability for environmental damage, its
business and financial condition could be materially adversely
affected.
Alternatives to Landfill Disposal: Alternatives to landfill
disposal, such as recycling and composting, are increasingly
being used. In addition, in certain of the Company's markets
incineration is an alternative to landfill disposal. There also
has been an increasing trend at the state and local levels to
mandate recycling and waste reduction at the source and to
prohibit the disposal of certain type of wastes, such as yard
wastes, at landfills. These developments may result in the volume
of waste going to landfills being reduced in certain areas, which
may affect the Company's ability to operate its landfills at
their full capacity and/or affect the prices that can be charged
for landfill disposal services.
Commodity Risk Upon Resale of Recyclables: A portion of the
Company's revenues from waste reuse and reduction programs is
derived from the sale of recyclable waste products. The resale
prices of, and demand for, recyclable waste products can vary
significantly and are subject to changing market conditions.
Accordingly, the Company's revenues from such sales may
materially vary from period to period.
Capitalized Expenditures: In accordance with generally
accepted accounting principles, the Company capitalizes certain
expenditures and advances relating to its acquisitions, pending
acquisitions and landfill development and expansion projects.
Indirect acquisition costs, such as executive salaries, general
corporate overhead, public affairs and other corporate services,
are expensed as incurred. The Company's policy is to charge
against earnings any unamortized capitalized expenditures and
advances (net of any portion thereof that the Company estimates
will be recoverable, through sale or otherwise) relating to any
operation that is permanently shut down, any pending acquisition
that is not consummated, and any landfill development or
expansion project that is not successfully completed. There can
be no assurance that the Company in future periods will not be
required to incur a charge against earnings in accordance with
such policy, which charge, depending upon the magnitude thereof,
could adversely affect the Company's results of operations.
Risks Associated with Acquisitions: In connection with any
acquisition made by the Company, there may be liabilities that
the Company fails or is unable to discover, including liabilities
arising from environmental contamination or non-compliance by
prior owners with environmental laws or regulatory requirements,
and for which the Company, as a successor owner, may be
responsible.
As the Company completes acquisitions in a region, it seeks
to achieve synergies and efficiencies through the integration of
newly acquired and existing operations in the region. There can
be no assurance, however, that the Company will be successful in
this regard or that such efforts may not in certain circumstances
adversely affect its existing operations.
Availability of Acquisition Targets: The Company's ongoing
acquisition program is a key element of its strategy for
expanding as an integrated provider of nonhazardous solid waste
management services. Consequently, the future growth of the
Company depends in large part upon the successful continuation of
this program. The Company, however, in some cases may encounter
substantial competition in its efforts to acquire landfills and
collection operations and there can be no assurance that the
Company will succeed in locating appropriate acquisition
candidates that can be acquired at price levels that the Company
considers appropriate.
Financial Assurance Obligation: The Company is usually
required to post a performance bond or a bank letter of credit or
to provide other forms of financial assurance in connection with
municipal residential collection contracts and the operation,
closure and post-closure of landfills. If the Company were
unable to obtain surety bonds or letter of credit in sufficient
amounts or at reasonable rates, or to provide other required
forms of financial assurance, it might be precluded from entering
into additional municipal collection contracts or obtaining or
retaining required landfill permits and approvals.
Item 2. Properties
The principal fixed assets used by the Company in connection
with its landfill operations are its landfills which are
described under Item 1 - "Business - Operations - Landfills."
The landfill operations currently owned by the Company are
situated on sites owned by the Company, with four exceptions.
The Company's landfill site in Fitchburg, Massachusetts is
partially leased (approximately 35 acres) under a lease scheduled
to expire in 2017; its landfill site in Granby, Massachusetts is
partially leased (approximately 41 acres) under a lease schedule
to expire in 2002; its landfill site in Chicopee, Massachusetts
is partially leased (approximately 101 acres) under a lease
scheduled to expire in 2013; and its landfill site in Manistee,
Michigan is partially leased (approximately 40 acres) under an
open ended lease.
The principal fixed assets used by the Company in its
collection operations and waste reuse and reduction programs are
approximately 670 acres of land used for composting and for
transfer stations and other facilities related to collection
operations (of which approximately 563 acres are owned and 107
acres are leased); and approximately 240 heavy equipment and
machinery units, 561,000 collection containers and approximately
2,700 trucks and trailers (some of which are owned and some of
which are leased).
The Company's corporate headquarters are located in
Greenwich, Connecticut, where it leases approximately 15,300
square feet of space.
Item 3. Legal Proceedings
On January 9, 1996, the Junker Landfill Trust sued the
Company, Junker Sanitation Services, Inc., and United Waste
Transfer, Inc., both of which are subsidiaries of the Company,
and approximately 800 other parties in the United States District
Court for the Western District of Wisconsin, Case No. 96C-19S,
for contribution under the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), as well as state
common law, with respect to the Junker Landfill site in Hudson,
Wisconsin. By order entered July 19, 1996, the court approved a
consent decree which was signed by the Company and others with
respect to this site. The Company's obligations under the
consent decree are secured by, and limited to, certain
indemnification rights which the Company has against the former
owner of Junker Sanitation Services, Inc. A Settlement Agreement
has been reached with the Plaintiff which involves no payment
obligation on the part of Junker Sanitation Services, Inc.,
United Waste Systems, Inc., or United Waste Transfer, Inc. The
settlement will become complete when the Court approves a second
consent decree, which approval is expected at a hearing scheduled
for April 29, 1997.
On May 26, 1995, the Company sued Robert Foley and Matthew
Parzych in the United States District Court for the District of
Connecticut, Case No. 3:95-CV-985. The defendants sold stock in
certain Massachusetts corporations to the Company under an
agreement dated April 1, 1992 (the "1992 agreement"). In the
suit the Company seeks approximately $1,115,000 in cash and
securities from an escrow account and additional amounts from
defendants by reason of indemnity provisions contained in the
1992 agreement and confirmed in an agreement dated January 28,
1994 (the "1994 agreement"). The defendants have counterclaimed
against the Company and its chief executive officer, seeking to
invalidate the 1994 agreement primarily for alleged lack of
consideration and economic duress, and to receive alleged damages
and costs. The counterclaims for damages are primarily for
alleged misrepresentations by the Company in connection with the
1992 agreement, and were asserted by defendants notwithstanding
provisions in the 1994 agreement which generally released the
Company from all claims. The Company intends to vigorously
pursue its claims in this action and to seek dismissal of the
counterclaims.
In June 1996, Dale Lynch, Dennis Lynch and D.L. Lynch sued
the Company, its chief executive officer and a subsidiary of the
Company in the Circuit Court of Whitley County, Kentucky (Index
No. 96 CI 00355). The subsidiary purchased the Tri-County
landfill from the plaintiffs in 1991. The suit primarily seeks
compensatory and punitive damages for alleged breach of contract
and for allegedly fraudulent representations in connection with
this purchase. The Company has filed a Counterclaim for breach
of warranties and fraud. The Company has also sought
indemnification for breach of warranties. In January 1997, the
plaintiffs filed an Amended Complaint which seeks relief similar
to that of their original Complaint. The Company intends to file
a Motion to Dismiss seven of the eight counts in the Complaint,
including the fraud count. The Company has served discovery
requests and deposition notices on plaintiffs and intends to
vigorously defend against plaintiffs' claims and prosecute its
Counterclaim. In the opinion of management, this suit should not
materially affect the financial position of the Company.
In July 1996 the Company filed suit against H.A.M. Sanitary
Landfill, Inc. and its shareholders. The suit is now pending in
the Circuit Court for Monroe County, West Virginia, Civil Action
No. 96-C-51. The Company, among other things, seeks to recover
$1.8 million in advances which the Company made in connection
with an agreement, since terminated, to purchase the H.A.M.
Sanitary Landfill in West Virginia from the defendants, and to
recover certain personal property. The defendants in September
1996 filed a counterclaim against the Company and a subsidiary
which seeks compensatory and punitive damages for claims of
alleged breach of contract, breach of fiduciary duty under an
alleged joint venture, unjust enrichment and fraud. The Company
will vigorously prosecute its claim and defend against the
counterclaim. In the opinion of management, the counterclaim
should not materially affect the financial position of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year covered by this
report, no matter was submitted to a vote of security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Market for Common Stock and Dividends
The Common Stock of the Company trades on the Nasdaq
National Market tier of the Nasdaq Stock Market under the symbol
UWST. The table below sets forth the high and low reported sales
prices of the Common Stock on the Nasdaq Stock Market for the
periods indicated.
High Low
Quarter ended December 31, 1996 $38 3/4 $28 3/4
Quarter ended September 30, 1996 35 1/2 23 3/4
Quarter ended June 30, 1996 32 1/4 24 1/4
Quarter ended March 31, 1996 25 3/4 17 7/8
Quarter ended December 31, 1995 21 5/8 18
Quarter ended September 30, 1995 21 7/8 17 1/4
Quarter ended June 30, 1995 18 13 5/8
Quarter ended March 31, 1995 15 11 1/2
No cash dividends have been paid to date by the Company on
its Common Stock. The Company intends to retain all earnings for
the foreseeable future for use in the operation and expansion of
its business and, accordingly, the Company currently has no plans
to pay dividends on its Common Stock. The payment of any future
dividends will be determined by the Board of Directors in light
of conditions then existing, including the Company's earnings,
financial condition and requirements, restrictions in financing
agreements, business conditions and other factors. Under the
terms of the Company's revolving credit facility, the Company at
present is prohibited from paying cash dividends on its Common
Stock. See Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and
Capital Resources" and Note 6 of Notes to Consolidated Financial
Statements of the Company included elsewhere herein.
On March 12, 1997, there were approximately 150 holders of
record of the Company's Common Stock. The Company estimates that
the number of beneficial holders of its Common Stock is in excess
of 6,600.
Sale of Unregistered Securities
Set forth below is certain information concerning sales by
the Company of unregistered securities during 1996. The
issuances by the Company of the securities sold in the
transactions referenced below were not registered under the
Securities Act of 1933, pursuant to the exemption contemplated by
Section 4(2) thereof for transactions not involving a public
offering.
Shares
Month Issued
January 28,298
June 730,765
September 579,857
December 260,076
Total 1,598,996
The above issued shares of the Company's Common Stock were
issued to acquire two landfills, four landfill operating
contracts, four transfer stations and eight collection companies
and certain related assets.
Item 6. Selected Financial Data
The table below presents selected financial data for the
Company. This data should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto and
Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein.
During the periods presented below, the Company completed
certain acquisitions that were accounted for as poolings-of-interests
and certain that were accounted for as purchases. The
selected financial data presented below has been restated for all
periods presented to include the accounts of the businesses
acquired in transactions accounted for as poolings-of-interests
(excluding certain of such transactions that were not material)
as if the Company and these businesses had always been in the
same operating group. The accounts of businesses acquired in
transactions accounted for as purchases are included from their
respective purchase dates. In view of the fact that the
Company's operating results for the periods presented below were
impacted by acquisitions that were accounted for as purchases,
the Company believes that its results of operations are not
directly comparable. See Note 3 of Notes to Consolidated
Financial Statements of the Company included elsewhere herein.
All share and per share data in this Item 6 has been
adjusted to reflect a two-for-one stock split in the form of a 100%
stock dividend that became effective in June 1996.
<TABLE>
UNITED WASTE SYSTEMS, INC.
Consolidated Five-year Summary of Selected Financial Data
(In thousands, except per share data)
<CAPTION>
Year ended December 31,
1996 1995 1994 1993 1992
(unaudited)(4)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 335,743 $ 228,377 $ 146,043 $ 109,006 $ 56,771
Cost of operations 206,786 140,814 88,612 68,200 37,077
Selling, general and
administrative expense 53,107 34,841 22,527 20,440 14,276
Income from operations 75,850 52,722 34,904 20,366 5,418
Interest expense 14,950 10,061 6,424 4,705 3,028
Other expense(income), net 251 (948) (474) (825) (796)
Income before
provision for pro forma
income taxes (1) 60,649 43,609 28,954 16,486 3,186
Provision for pro forma
income taxes (1) 25,619 16,779 10,009 4,921 2,068
Pro forma net
income 35,030 26,830 18,945 11,565 1,118
Net deductions from
pro forma income
available to common
stockholders (2) -- 373 1,275 1,655 2,529
</TABLE>
<TABLE>
UNITED WASTE SYSTEMS, INC.
Consolidated Five-year Summary of Selected Financial Data - Cont'd
(In thousands, except per share data)
<CAPTION>
Year ended December 31,
1996 1995 1994 1993 1992
(unaudited)(4)
<S> <C> <C> <C> <C> <C>
Pro forma income (loss)
available to common
stockholders $ 35,030 $ 26,457 $ 17,670 $ 9,910 $ (1,411)
Pro forma primary earnings
(loss) per common and
common equivalent
share (3) $ .88 $ .77 $ .68 $ .49 $ (.14)
Pro forma fully diluted
earnings (loss)per
common and common
equivalent
share (3) $ .87 $ .77 $ .65 $ .48 $ (.14)
Cash dividends on common
stock -- -- -- -- --
</TABLE>
<TABLE>
UNITED WASTE SYSTEMS, INC.
Consolidated Five-year Summary of Selected Financial Data - Cont'd
(In thousands, except per share data)
<CAPTION>
December 31,
1996 1995 1994 1993 1992
(unaudited)(4) (unaudited)(4)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 2,568 $ 6,722 $ 2,600 $ 1,777 $ 12,767
Working capital
(deficiency) 11,821 (3,975) (8,070) (8,240) (919)
Total assets 801,042 540,568 254,855 188,978 130,967
Long-term debt, less
current portion 302,704 156,194 50,936 41,122 17,874
Obligations under capital
leases, long-term 373 4,688 1,732 2,848 2,131
Nonrecourse revenue bonds,
less current portion 8,900 9,400 9,700 10,000 10,000
Accrued landfill costs,
less current portion 44,879 27,664 15,889 11,123 9,678
Redeemable preferred stock -- -- -- -- 192
</TABLE>
(Footnotes on following page)
(1) Certain of the companies that the Company acquired in
transactions accounted for as pooling-of-interests were
Subchapter S Corporations or partnerships prior to being
acquired. See Notes 3 and 8 of Notes to Consolidated
Financial Statements of the Company included elsewhere
herein. In general, the income or loss of a Subchapter S
Corporation or partnership is passed through to its owners
rather than being subjected to taxes at the entity level.
Pro forma net income or loss reflects a provision for income
taxes on a pro forma basis for all periods presented as if
all such companies were liable for federal and state income
taxes as taxable corporate entities for all periods
presented.
(2) Reflects deductions for dividends on and accretions of
preferred stock and certain interest expense adjustments
related to use of the treasury stock method of calculating
earnings per share.
(3) Pro forma primary earnings (loss) per common and common
equivalent share for the years ended December 31, 1996,
1995, 1994, 1993 and 1992 are computed based upon weighted
average equivalent shares outstanding of 39,943,715,
34,693,501, 26,076,421, 20,108,379, and 10,255,681,
respectively. Pro forma fully diluted earnings (loss) per
common and common equivalent share for the years ended
December 31, 1996, 1995, 1994, 1993, and 1992 are based upon
weighted average equivalent shares outstanding of
42,913,825, 34,898,801, 29,153,689, 20,840,881, and,
10,255,681, respectively.
(4) The Company's financial statements were restated to reflect
the June 28, 1996 merger with the Salinas Companies, which
was accounted for as a pooling-of-interests. See Note 3 of
Notes to Consolidated Financial Statements of the Company
included elsewhere herein. The income statements of the
Salinas Companies included in such financial statements were
not audited for years prior to 1993 and the balance sheets
of the Salinas Companies included in such statements were
not audited for years prior to December 31, 1994.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion reviews the Company's operations
for the three years ended December 31, 1996 and should be read in
conjunction with the Consolidated Financial Statements and
related Notes thereto of the Company included elsewhere herein.
The following discussion includes statements that are
forward-looking in nature. These statements are generally
identified by the inclusion of phrases such as "the Company
expects," "the Company anticipates," "the Company believes," "the
Company estimates" and other phrases of similar meaning. Whether
such statements ultimately prove to be accurate depends upon a
variety of factors that may affect the business and operations of
the Company. Certain of these factors are discussed under Item 1
- -" Business - Factors that May Influence Future Results and
Accuracy of Forward-Looking Statements."
Introduction
The Company was formed in July 1989 to acquire and operate
businesses in the nonhazardous solid waste services industry.
Since its formation, the Company has completed over 170
acquisitions, including 90 completed during 1996 and through
March 25, 1997. The focus of the Company's acquisition program
at present is to capitalize on opportunities around its existing
operating regions that will create synergies and efficiencies, as
well as to selectively enter several new regions annually. The
Company may also selectively consider acquisition or
consolidation opportunities involving other public companies or
large privately-held companies.
The acquisitions completed by the Company during the periods
discussed below include seven that were accounted for as a
pooling-of-interests. (For information concerning such
acquisitions and the restatement of the Company's financial
statements in connection with certain such acquisitions, see Note
3 of Notes to Consolidated Financial Statements of the Company
included elsewhere herein). The other acquisitions completed
during such periods were accounted for as purchases. The results
of the businesses acquired in acquisitions accounted for as
purchases are included in the Company's financial statements only
from their respective dates of acquisition. In view of the fact
that the Company's operating results for the periods presented
below were impacted by acquisitions, the Company believes that
the results of its operations for such periods are not directly
comparable.
General
The Company's revenues have been primarily attributable to
(i) collection revenues and (ii) fees (commonly referred to as
"tipping fees") charged to dispose of waste at the Company's
landfills. The table below shows for the periods indicated the
percentage of the Company's total revenues attributable to
various sources.
Year ended December 31
1996 1995 1994
Landfill operations(1) 30% 31% 33%
Collection operations(2) 65 61 58
Waste reuse and reduction
programs(3) 2 5 4
Other services 3 3 5
Total 100% 100% 100%
_________________
(1) Revenues from landfill operations primarily represent fees
charged to dispose of waste at the Company's landfills
(including fees charged to the Company's collection
operations) and fees collected under landfill operating
contracts.
(2) Excludes the portion of collection revenues attributable to
disposal charges for solid waste collected by the Company
and disposed of at the Company's landfills.
(3) See Item 1 - "Business - Operations - Waste Reuse and
Reduction Programs" for a description of the Company's waste
reuse and reduction programs.
In certain instances, the amount of revenues that a newly
acquired business contributes to the Company's revenues may be
significantly less than the revenues that such business had prior
to being acquired due to the elimination of intercompany revenues
resulting from consolidation with the Company.
A portion of the Company's revenues from waste reuse and
reduction programs is derived from the sale of recyclable waste
products. The resale prices of, and demand for, recyclable waste
products can vary significantly and be subject to changing market
conditions. Accordingly, the Company's revenues from such sales
may materially vary from period to period.
Landfill cost of operations includes primarily direct and
indirect labor, the legal and administrative cost of ongoing
environmental compliance, certain landfill taxes, franchise fees
or host community fees, rental payments under leases with respect
to landfill sites that are not owned, landfill site maintenance,
depreciation and amortization expense, and accruals for closure
and post-closure expenses anticipated to be incurred in the
future. Certain direct landfill development costs, such as
engineering, upgrading, construction and permitting costs paid to
outside parties in respect of permits acquired or in the process
of being acquired, are capitalized and amortized based on
consumed airspace. All indirect landfill development costs, such
as executive salaries, general corporate overhead, public affairs
and other corporate services, are expensed as incurred. The
Company believes that the costs associated with the engineering,
ownership and operation of landfills will increase in the future
as a result of increasing federal, state and local regulation and
a growing community awareness of the landfill permitting process.
Collection cost of operations includes primarily direct and
indirect labor, insurance, fuel, equipment maintenance costs,
tipping fees paid to third party landfills and, with respect to
the Company's asbestos collection operations, transportation
costs.
Selling, general and administrative expense ("SG&A")
includes primarily management salaries, clerical and
administrative overhead, costs associated with the Company's
commercial and industrial sales force and community relations
expenses. SG&A also includes expenses associated with completing
acquisitions that are accounted for as pooling-of-interests,
since such expenses are not capitalized.
The Company capitalizes engineering, legal, accounting and
other direct costs that are incurred in connection with potential
acquisitions. The Company, however, routinely evaluates such
capitalized costs and charges to expense those relating to
abandoned acquisitions. Indirect acquisition costs, such as
executive salaries, general corporate overhead, public affairs
and other corporate services, are expensed as incurred.
The Company estimates landfill closure and post-closure
reserves based on an analysis of the requirements of the Subtitle
D Regulations and state laws and regulations. Since the annual
charge for each landfill is determined based upon the total
estimated unaccrued landfill closure and post-closure costs and
the estimated portion of remaining airspace filled during the
year, the provision may vary from period to period, as the volume
of waste disposed of in the landfill increases or decreases,
expansions and new permits change the life of the landfill and
other circumstances require management to reevaluate and to
change such estimates. The Company estimates that the aggregate
liability for the closure and post-closure costs of the
facilities that it currently owns will be approximately $66.6
million. At December 31, 1996, reserves for landfill closure and
post-closure costs (including reserves assumed through
acquisitions) were approximately $49.5 million, and the balance
will be accrued over the remaining operating life of the
landfills. See Notes 2 and 12 of Notes to Consolidated Financial
Statements of the Company included elsewhere herein.
Results of Operations
Three years ended December 31, 1996, 1995 and 1994
Revenues. Revenues for 1996 were $335.7 million,
representing an increase of 47.0% over revenues for 1995 of
$228.4 million. Of this increase, approximately 38 percentage
points was attributable to revenues acquired through acquisitions
(net of revenue decreases resulting from businesses disposed of
in 1996). Such revenues include revenues from (i) the businesses
acquired by the Company subsequent to December 31, 1995 and (ii)
businesses that were acquired throughout 1995 and thus were
included in the Company's 1995 results for only a portion of the
year and in the Company's 1996 results for a full year. The
balance of this increase was due to an increase in 1996 in volume
of waste received by the Company's operations that were owned by
the Company throughout both periods (approximately 5 percentage
points) and in prices charged for services (approximately 4
percentage points).
Revenues for 1995 were $228.4 million, representing an
increase of 56.4% over revenues for 1994 of $146.0 million. Of
this increase, approximately 48 percentage points was due to
revenues attributable to (i) the businesses acquired by the
Company subsequent to December 31, 1994 and (ii) businesses that
were acquired throughout 1994 and thus were included in the
Company's 1994 results for only a portion of the year and in the
Company's 1995 results for a full year. The balance of this
increase was due to an increase in 1995 in volume of waste
received by the Company's operations that were owned by the
Company throughout both periods (approximately 4 percentage
points) and in prices charged for services (approximately 4
percentage points).
Cost of Operations. In both 1996 and 1995, gross margin
benefitted from the fact that the revenue growth attributable to
the price and volume increases discussed above was achieved
without a commensurate increase in costs. However, in both such
years, collection revenues (which generally have lower margins
than landfill operations) increased as a percentage of total
revenues. In 1996, such benefit more than fully offset such
lower collection margins, resulting in cost of operations as a
percentage of sales decreasing slightly to 61.6% in 1996 from
61.7% in 1995. In 1995, such benefit only partially offset such
lower collection margins, resulting in cost of operations as a
percentage of sales increasing to 61.7% in 1995 from 60.7% in
1994.
Selling, General and Administrative Expense. Selling,
general and administrative expense ("SG&A") increased to $53.1
million during 1996 from $34.8 million during 1995 and $22.5
million during 1994. As a percentage of revenues, SG&A was 15.8%
during 1996 compared with 15.3% during 1995 and 15.4% during
1994. The increase in SG&A as a percentage of revenues in 1996
compared with 1995 primarily reflected the fact that expenses
related to acquisitions accounted for as a pooling-of-interests
(of which there were six in 1996 and one in 1995) and writedown
of assets were a greater percentage of revenues in 1996 than in
1995 (1.8% in 1996 compared with 0.4% in 1995). Excluding such
expenses, SG&A as a percentage of revenues would have decreased,
primarily related to the fact that the revenue growth
attributable to acquisitions was achieved without a commensurate
increase in senior management expense or corporate overhead.
Interest Expense. Interest expense was $15.0 million, $10.0
million and $6.4 million in 1996, 1995 and 1994, respectively,
representing an increase of 48.6% in 1996 from 1995 and an
increase of 56.6% in 1995 from 1994. These increases primarily
reflected the fact that the Company's indebtedness increased
during each of these years primarily to fund acquisitions.
Interest capitalized as a component of construction projects
during 1996, 1995 and 1994 amounted to $1,682,000, $1,349,000 and
$722,000, respectively.
Other (Income) Expense. Other expense, net was $252,000 in
1996 and other income, net was $949,000 and $474,000 in 1995 and
1994, respectively. The increase in other expense, net in 1996
was primarily attributable to a $2.0 million charge resulting
from the sale of the Company's transfer station in Pennsylvania,
offset by increased interest income in 1996 resulting from higher
levels of cash equivalents in 1996 than in 1995. The increase in
other income, net in 1995 compared with 1994, resulted from
increased interest income from higher levels of cash equivalents
in 1995 than in 1994.
Income Taxes. Income taxes increased to $25.6 million, or
an effective rate of 42.2%, during 1996 from $16.8 million, or an
effective rate of 38.5%, during 1995, and $10.0 million, or an
effective rate of 34.6% during 1994. The increase in the
effective rate in 1996 compared with 1995 was primarily due to
the fact that certain transaction expenses relating to
acquisitions accounted for as a pooling-of-interests are not
deductible in determining taxable income and such expenses were
higher in 1996 than in 1995. The increase in the effective rate
in 1995 compared with 1994 primarily reflected the fact that the
Company had available net operating loss carryforwards in 1994,
while it utilized virtually no net operating loss carryforwards
in 1995.
Liquidity and Capital Resources
The Company completed 79 acquisitions in 1996. Primarily as
a result thereof: (i) total assets increased to $801.0 million at
December 31, 1996 from $540.6 million at December 31, 1995, (ii)
long-term debt increased to $302.7 million at December 31, 1996
from $156.2 million at December 31, 1995 (primarily reflecting
borrowings in connection with funding such acquisitions), (iii)
accrued expenses and other current liabilities increased to $24.8
million at December 31, 1996 from $17.1 million at December 31,
1995 (primarily reflecting the assumption or increase of current
liabilities in connection with such acquisitions) and (iv)
accrued landfill costs increased to $49.5 million at December 31,
1996 from $34.2 million at December 31, 1995 (primarily
reflecting accrued landfill cost associated with such
acquisitions).
Stockholders' equity increased to $318.7 million at December
31, 1996 from $242.3 million at December 31, 1995. This increase
was primarily attributable to (i) the exercise of Common Stock
warrants and options, (ii) the issuance of Common Stock of the
Company as consideration for certain acquisitions and (iii) net
income in 1996.
The Company (i) has used, and expects to continue using, a
substantial amount of cash generated from operations to fund
acquisitions, thereby reducing its current assets, and (ii) in
connection with acquisitions and the financing of machinery and
equipment, the Company has assumed or incurred indebtedness with
relatively short-term repayment schedules, thereby increasing its
current liabilities. As a result of the foregoing financing
practices, the Company has had, and expects to continue to have,
low levels of working capital or working capital deficiencies.
Although the Company had working capital of $11.8 million at
December 31, 1996, the Company expects that in the future it may
maintain lower levels of working capital or working capital
deficiencies based on the financing practices described above.
As discussed below, the Company believes that its working capital
position will not impair its ability to meet its ongoing cash
requirements and continue its acquisition program, although there
can be no assurance of this.
During 1996, the Company generated net cash from operations
of approximately $78.2 million and had net cash from financing
activities of approximately $140.1 million. The Company used
approximately $157.1 million of such funds generated from
operations and financing activities primarily to fund the cash
portion of the consideration paid for business acquisitions and
used approximately $55.3 million of such funds for capital
expenditures.
The Company's credit facility was amended in December 1996,
to, among other things, eliminate certain covenants and to lower
borrowing costs. The credit facility as so amended (the "Credit
Facility") provides for a $190 million, three year, secured
revolving credit facility due December 1999. Outstanding loans
under the Credit Facility bear interest at a rate per annum equal
to the Eurodollar Rate (Reserve Adjusted) (as defined in the loan
agreement providing for the Credit Facility) applicable to each
interest period plus 0.625% to 1.25% per annum or the Alternate
Reference Rate (as defined) from time to time in effect. The
Credit Facility is secured by the stock of the Company's
subsidiaries, restricts the Company from granting other liens on
its assets (subject to certain limited exemptions), and requires
the Company to comply with certain covenants, including, but not
limited to, maintenance of certain financial ratios, limitations
on additional indebtedness, limitations on capital expenditures
and a prohibition on the Company's payment of cash dividends on
its Common Stock. The Credit Facility also currently requires
that the consent of the lenders be obtained in order for the
Company to make an acquisition that provides for an aggregate
cash purchase price of $50 million or more. In addition, the
Credit Facility prohibits the Company from using more than $15
million of its cash to secure closure and post-closure
obligations that the Company may have relating to its landfills.
At December 31, 1996, the outstanding amount of indebtedness
under the Credit Facility was $31.5 million, compared with $41.8
million at December 31, 1995, and the weighted average interest
rate on such indebtedness was 6.98% per annum at December 31,
1996. All outstanding indebtedness under the Credit Facility was
repaid in March 1997 from the proceeds of a public offering as
described below.
The Credit Facility also allows the Company to obtain up to
$90 million in letters of credit. These letters of credit may be
used, among other purposes, to secure or support closure
obligations that the Company may have relating to its landfills.
On December 31, 1996, the face amount of outstanding letters of
credit issued pursuant to the Credit Facility was approximately
$61.3 million. The aggregate amount that the Company is
permitted to borrow under the Credit Facility is reduced by the
aggregate face amount of all outstanding letters of credit issued
thereunder.
In June 1996, the Company issued $150 million principal
amount of 4-1/2% Convertible Subordinated Notes due June 1, 2001
(the "Convertible Notes"). The Convertible Notes bear interest
at a fixed rate of 4-1/2% per annum, payable semi-annually. The
Convertible Notes are convertible into Common Stock of the
Company at a conversion price of $32.50 per share. The
Convertible Notes are unsecured obligations of the Company and
are subordinated to all existing and future Senior Indebtedness
(as defined in the indenture relating to the Convertible Notes)
of the Company and are effectively subordinated to all
indebtedness and other liabilities of the subsidiaries of the
Company.
In March 1997, the Company completed a public offering in
which it issued 3,450,000 shares of Common Stock at a price of
$36.50 per share. The net proceeds to the Company from this
offering was approximately $119.3 million. The Company used
approximately $47.2 million of such net proceeds to repay all
outstanding indebtedness under the Credit Facility, and currently
there is no indebtedness outstanding thereunder. As of March 25,
1997, the Company has cash and cash equivalents of approximately
$69.0 million.
Set forth below is a discussion of the Company's primary
ongoing cash requirements and the means by which it expects to
meet these requirements in the future.
Operating Activities. The Company anticipates that for the
foreseeable future cash generated from operating activities will
be sufficient to provide the cash required for operating
activities.
Capital Expenditures. The Company expects to make capital
expenditures on an ongoing basis for improvements to, and
expansion of, its landfills and for equipment purchases. The
Company estimates that in respect of its existing operations it
will be required to make capital expenditures of approximately
$62 to $67 million in each of 1997 and 1998. The Company expects
that it will fund such estimated capital expenditures in respect
of its existing operations from cash on hand and cash generated
from operations, supplemented, if required, by borrowings
available under the Credit Facility. In addition, the Company
expects that it will be required to make capital expenditures in
respect of new operations that it may hereafter acquire. The
Company cannot quantify at this time the amount of such capital
expenditures.
Acquisitions. An element of the Company's strategy is to
continue to acquire additional solid waste companies. The
Company expects to pay for future acquisitions using cash,
capital stock, assumption of indebtedness and/or notes, ongoing
royalties and contingent payments. The Company expects that any
cash required for future acquisitions will be provided by a
combination of cash on hand, cash generated from operations,
borrowings available under the Credit Facility and future debt or
equity financing. There can be no assurance, however, that any
such future debt or equity financing will be available or, if
available, will be available on terms satisfactory to the
Company.
In order to minimize cash required to complete acquisitions
and adequately secure indemnity obligations, the Company
frequently structures its landfill acquisitions in a manner such
that a portion of the purchase consideration is deferred,
contingent or payable in the form of future royalties. The
Company expects that deferred or contingent payments and
royalties that may become payable in respect of its completed
acquisitions will be funded from cash generated from operations.
Debt Repayment. At December 31, 1996, the Company had debt
and capital lease obligations of approximately $317.9 million.
The Company will be obligated to retire approximately $5.9
million and $6.2 million of this indebtedness in 1997 and 1998,
respectively. The Company plans to meet such obligations from
cash on hand, cash generated from operations, borrowings
available under the Credit Facility and/or additional financing.
Financial Assurance. The Company is required to provide
financial assurance to various governmental and regulatory bodies
for closure, post-closure and remediation obligations. The
Company provides for these financial assurance obligations
primarily through the issuance of letters of credit obtained
under the Credit Facility, as well as through surety bonds and
irrevocable trust funds. As of December 31, 1996, the aggregate
amount of these financial assurance obligations was $42.4
million, $31.7 million of which is being satisfied by letters of
credit obtained under the Credit Facility. Under the Subtitle D
Regulations, new financial assurance requirements are scheduled to
become effective on April 9, 1997. The Company estimates that
when such regulations become fully effective the financial
assurance obligations that it will be required to provide in
order to continue certain of its existing landfill operations
will increase by approximately $11.6 million to approximately
$54.0 million, although there can be no asurance that the Company's calculations
will be approved by state regulatory authorities.
The Company plans to meet such increased
financial assurance obligations through additional letters of
credit obtained under existing or new credit facilities and,
where permitted, insurance policies.
Capitalized Expenditures
The Company, in accordance with generally accepted
accounting principles, capitalizes certain expenditures and
advances relating to its acquisitions, pending acquisitions and
landfill development and expansion projects. Indirect
acquisitions costs, such as executive salaries, general corporate
overhead, public affairs and other corporate services, are
expensed as incurred. The Company's policy is to charge against
earnings any unamortized capitalized expenditures or advances
(net of any portion thereof that the Company estimates will be
recoverable, through sale or otherwise) relating to any operation
that is permanently shut down, any pending acquisition that is
not consummated, and any landfill development or expansion
project that is not successfully completed. The Company also has
a substantial investment in its permitted landfills. If any of
the Company's landfills were to lose their permits, the Company
would charge against earnings the unamortized portion of its
investment and any necessary acceleration of closure and post
closure accruals. The Company has capitalized expenditures with
respect to substantially all of its other operations. There can
be no assurance that the Company will not be required in future
periods to incur charges against earnings relating to these
capitalized expenditures.
The Company capitalizes certain costs related to obtaining
certain financings and amortizes these costs over the life of the
related financing. In the event that the Company refinances any
financings with respect to which it has capitalized costs, the
Company would be required to charge against earnings the
unamortized portion of such costs. At December 31, 1996, the
Company's unamortized financing costs amounted to approximately
$7.1 million.
Inflation and Prevailing Economic Condition
To date, inflation has not had a significant impact on the
Company's operations. The Company generally enters into long-term
contracts only if such contracts include provisions for
price escalations based on a price index.
Seasonality
The Company's revenues tend to be somewhat lower in the
winter months. This is generally reflected in the Company's
first quarter results and may also be reflected in its fourth
quarter results. This is primarily attributable to the fact that
(i) the volume of waste relating to construction and demolition
activities and activities relating to the remediation of
contaminated soils tends to increase in the spring and summer
months and (ii) the volume of waste relating to industrial and
residential waste in certain of the regions where the Company
operates tends to decrease during the winter months.
Particularly harsh weather conditions may result in the temporary
suspension of certain of the Company's operations and could
adversely affect the Company's overall results of operations.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share", which specifies the computation,
presentation and disclosure requirements for earnings per share.
The statement is effective for annual periods ending after
December 15, 1997 and early adoption is not permitted. The
Company has not yet determined the future impact of this
pronouncement.
In October 1996, the Accounting Standards Executive
Committee of the American Institute of Certified Public
Accountants issued Statement of Position No. 96-1 ("SOP 96-1"),
Environmental Remediation Liabilities. SOP 96-1 provides
authoritative guidance on the recognition, measurement, display
and disclosure of environmental remediation liabilities.
SOP 96-1 also contains a discussion of major federal legislation
relating to environmental remediation and pollution prevention
and control. SOP 96-1 is effective for fiscal years beginning
after December 15, 1996. Although such costs are not presently
determinable, adoption of SOP 96-1 is not expected to have a
material effect on the Company's financial position and results
of operations. See Notes 2 and 12 of Notes to Consolidated
Financial Statements of the Company included elsewhere herein.
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page
(1) Consolidated Financial Statements:
Report of Independent Auditors . . . . . . . . . . . . . . . . 54
Consolidated Balance Sheets as of December 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . 58
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1996, 1995 and 1994 . . . . . . . 59
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . 62
Notes to Consolidated Financial Statements . . . . . . . . . . 65
(2) Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts. . . . . . . . . 90
Schedules other than those listed are omitted as they are not
applicable or the required or equivalent information has been
included in the financial statements or notes thereto.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
United Waste Systems, Inc.
We have audited the accompanying consolidated balance sheets of
United Waste Systems, Inc. as of December 31, 1996 and 1995 and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period
ended December 31, 1996. Our audits also included the financial
statement schedule listed in the index at Item 14(a). These
financial statements and schedule are the responsibility of the
management of United Waste Systems, Inc. Our responsibility is
to express an opinion on these financial statements and schedule
based on our audits. We did not audit the 1994 financial
statements of the Carmel Marina Companies, wholly-owned
subsidiaries, which statements reflect total revenues
constituting 15% in 1994 of the related consolidated totals.
Those statements were audited by other auditors, whose report has
been furnished to us and our opinion, insofar as it relates to
data included for the Carmel Marina Companies, is based solely on
the report of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and, for 1994, the report of
other auditors, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of United Waste Systems, Inc. at December 31,
1996 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
ERNST & YOUNG LLP
MetroPark, New Jersey
February 21, 1997,
except for Note 13, as
to which the date is
March 25, 1997
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,567,854 $ 6,721,849
Accounts receivable, net of
allowance for doubtful accounts
of $3,076,000 in 1996 and
$2,249,000 in 1995 54,963,664 38,522,126
Prepaid expenses and
other current assets 29,989,310 14,198,544
Total current assets 87,520,828 59,442,519
Property and equipment, net
of accumulated depreciation of
$94,407,414 in 1996 and
$58,866,599 in 1995 387,980,224 289,378,346
Intangible assets, net 286,851,677 171,739,197
Other assets 38,688,965 20,008,399
$801,041,694 $ 540,568,461
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and nonrecourse bonds $ 5,064,413 $ 5,644,096
Accounts payable 23,923,298 18,031,701
Deferred revenue 12,189,998 8,291,415
Due to seller 4,258,016 6,465,720
Short-term accrued landfill costs 4,648,923 6,524,024
Current portion of capital lease
obligations 846,528 1,383,576
Accrued expenses and other
current liabilities 24,768,470 17,077,402
Total current liabilities 75,699,646 63,417,934
Long-term debt, less current portion 302,704,119 156,193,971
Obligations under capital leases, less
current portion 373,296 4,687,554
Nonrecourse sewage facility revenue
bonds, less current portion 8,900,000 9,400,000
Accrued landfill costs, less
current portion 44,878,800 27,663,907
Other long-term liabilities 13,137,811 3,056,578
Deferred income taxes 36,634,609 33,885,306
Commitments and contingencies
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
1996 1995
<S> <C> <C>
Stockholders' equity:
Preferred stock, $.001
par value, 5,000,000 shares
authorized; none outstanding
Common stock, $.001 par value,
75,000,000 shares authorized;
39,089,553 in 1996 and
17,578,550 in 1995 shares
issued and outstanding 39,090 17,579
Additional paid-in capital 248,973,700 200,267,630
Retained earnings 69,700,623 41,978,002
Total stockholders'
equity 318,713,413 242,263,211
$ 801,041,694 $ 540,568,461
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year ended December 31
1996 1995 1994
<S> <C> <C> <C>
Revenues $ 335,743,175 $ 228,376,762 $ 146,042,523
Cost of operations 206,786,205 140,813,834 88,611,515
Selling, general and
administrative
expense 53,106,485 34,841,125 22,526,867
Income from operations 75,850,485 52,721,803 34,904,141
Interest expense 14,949,746 10,061,290 6,424,630
Other expense
(income), net 251,661 (948,830) (474,211)
Income before provision
for pro forma
income taxes 60,649,078 43,609,343 28,953,722
Provision for pro forma
income taxes 25,619,566 16,779,259 10,008,796
Pro forma net income 35,029,512 26,830,084 18,944,926
Net deductions from pro
forma income available
to common stockholders -- 372,501 1,275,180
Pro forma income
available to
common stockholders $ 35,029,512 $ 26,457,583 $17,669,746
Pro forma primary earnings
per common share and
common equivalent
share $ .88 $ .77 $ .68
Pro forma fully diluted
earnings per common
share and common
equivalent share $ .87 $ .77 $ .65
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Preferred Stock Common Stock
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1993 1,797,581 $ 1,798 11,514,060 $ 11,514 $ 83,935,580 $ 4,535,071
Issuance of
common stock 763,578 764 15,279,707
Exercise of
common stock
warrants and
options 568,394 569 7,311,162
Conversion of 8%
convertible
preferred
stock (854,152) (854) 780,563 780 44
Preferred stock
dividends (1,275,180)
Contributed capital 590,667
Subchapter S
distributions
of pooled
entities (3,413,997)
Pro forma net
income 18,944,926
Pro forma tax
adjustment 2,064,773
Balance, December
31, 1994 943,429 944 13,626,595 13,627 107,117,160 20,855,593
Issuance of
common stock 2,469,299 2,469 79,684,075
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued
<CAPTION>
Preferred Stock Common Stock
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
Exercise of
common stock
warrants and
options 529,582 530 8,145,726
Conversion of 8%
convertible
preferred stock (943,429) (944) 862,105 862 82
Conversion of
convertible debt 90,969 91 2,660,752
Preferred stock
dividends (372,501)
Subchapter S
distributions
of pooled
entities (4,133,700)
Pro forma net
income 26,830,084
Pro forma tax
adjustment 1,458,361
Reclassification of
subchapter S
accumulated
earnings to
paid-in capital 2,659,835 (2,659,835)
Balance, December 31,
1995 17,578,550 17,579 200,267,630 41,978,002
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued
<CAPTION>
Preferred Stock Common Stock
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
<S> <C> <C> <C> <C>
Two-for-one stock
split 18,238,718 18,238 (18,238)
Poolings-of-
interests 758,558 759 422,967 (4,781,320)
Adjustment to
conform fiscal
year of pooled
entities (506,803)
Exercise of
common stock
warrants and
options 2,468,630 2,469 43,335,486
Issuance of common
stock 45,097 45 3,823,807
Subchapter S
distributions of
pooled entities (1,240,000)
Pro forma net
income 35,029,512
Pro forma tax
adjustment 363,280
Reclassification
of Subchapter S
accumulated
earnings to paid-in
capital 1,142,048 (1,142,048)
Balance, December 31,
1996 -- -- 39,089,553 $39,090 $248,973,700 $69,700,623
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year ended December 31
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating
activities:
Pro forma net
income $ 35,029,512 $ 26,830,084 $ 18,944,926
Adjustments to reconcile
pro forma net income to
net cash provided
by operating activities:
Depreciation and
amortization 37,875,896 24,308,227 14,247,906
Deferred income
taxes 10,057,369 3,859,374 1,871,425
Gain on sale of
assets (929,661) (174,767) (25,618)
Pro forma tax
adjustment 363,280 1,458,361 2,064,773
Changes in operating assets
and liabilities:
Accounts
receivable (5,332,538) (2,446,181) (6,076,126)
Other assets 1,614,204 (3,874,321) (163,365)
Accounts payable 1,994,813 (882,447) 4,870,279
Accrued landfill
costs (5,525,390) 34,893 (1,849,037)
Other
liabilities 3,045,562 7,277,122 3,536,541
Net cash provided by
operating
activities 78,193,047 56,390,345 37,421,704
Cash flows from investing
activities:
Purchases of property
and equipment (55,317,981) (39,189,791) (22,562,624)
Proceeds from sale
of assets 3,071,440 280,290 285,243
Restricted investments, net
(held to maturity) (8,151,482) (7,954,428) (186,741)
Payments of capitalized
project costs (1,244,535) (1,279,671) (2,305,851)
Payments of contingent
purchase price (3,752,072) (2,337,751) (6,262,879)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
<CAPTION>
Year ended December 31
1996 1995 1994
<S> <C> <C> <C>
Purchases of other companies,
net of cash acquired (157,092,207) (159,062,810) (27,331,361)
Net cash used in
investing activities (222,486,837) (209,544,161) (58,364,213)
Cash flows from financing
activities:
Dividends on preferred
stock (372,501) (1,275,180)
Proceeds from debt 225,130,225 278,281,793 40,839,022
Repayments of debt (94,638,687) (185,233,930) (32,977,036)
Repayments of capital lease
obligations (3,456,053) (614,686) (1,570,971)
Net proceeds from issuance
of common stock 66,072,051 15,280,471
Proceeds from exercise
of common stock warrants
and options 26,652,798 8,146,256 6,296,716
Payment of financing costs (5,437,000) (2,684,074) (582,483)
Due to sellers (6,871,488) (2,185,751) (317,498)
Notes receivable (1,104,505)
Contributed capital of
pooled entities 590,667
Subchapter S distributions
of pooled entities (1,240,000) (4,133,700) (3,413,997)
Net cash provided by
financing activitie 140,139,795 157,275,458 21,765,206
(Decrease) increase in cash
and cash equivalents (4,153,995) 4,121,642 822,697
Cash and cash equivalents
at beginning of year 6,721,849 2,600,207 1,777,510
Cash and cash equivalents
at end of year $ 2,567,854 $ 6,721,849 $ 2,600,207
Supplemental disclosure of
cash flow information:
Cash paid during the year
for interest, net of
amounts capitalized $13,328,310 $ 8,337,161 $ 5,970,394
Cash paid during the year
for income taxes $ 5,644,573 $10,362,953 $ 3,426,391
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
<CAPTION>
Year ended December 31
1996 1995 1994
<S> <C> <C> <C>
Supplemental schedule of
noncash investing and
financing activities:
The Company acquired the
net assets and assumed
certain liabilities of
other companies as follows:
Fair value of net assets
acquired:
Property and equipment $ 51,505,429 $121,210,509 $14,795,348
Other assets, net of cash
acquired 138,909,867 129,422,285 22,425,750
Less liabilities assumed (24,603,268) (67,813,389) (9,227,426)
Less amounts due to
seller (4,671,023) (7,965,999) (594,483)
Less amounts paid in common
stock (3,823,852) (13,333,150)
Less deposits and
capitalized project costs
paid in
prior periods (224,946) (2,457,446) (67,828)
Net cash paid $ 157,092,207 $159,062,810 $27,331,361
Equipment financed by capital
lease obligations $ 777,867 $ 167,370
Conversion of convertible
preferred stock 10,377,719 9,395,672
Conversion of convertible
debt 2,660,843
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
UNITED WASTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Note 1 - Organization and basis of presentation
United Waste Systems, Inc. and its subsidiaries ("United" or
"the Company") own, operate, acquire and develop nonhazardous
solid waste landfills, collection operations and other related
environmental services in selected markets in the United States.
The accompanying Consolidated Financial Statements include
the accounts of the Company and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated. The accompanying Consolidated Financial Statements
have been restated to include accounts of certain acquisitions
accounted for as poolings-of-interests (see Note 3).
All per share data of the Company for all periods included
in the Consolidated Financial Statements and related Notes to
Consolidated Financial Statements and all share data in the Notes
to Consolidated Financial Statements have been adjusted to
reflect a two-for-one stock split in the form of a 100% stock
dividend that became effective in June 1996 (see Note 9).
Note 2 - Summary of significant accounting policies
Cash Equivalents: The Company considers all highly liquid
instruments with a maturity of three months or less when
purchased to be cash equivalents.
Property and Equipment: Property and equipment are recorded
at cost and depreciated over their estimated useful lives using
the straight-line method. The estimated useful life ranges for
property and equipment are as follows:
Range of
Estimated
Useful Lives
Buildings and improvements 25 - 30 years
Vehicles and equipment 7 - 10 years
Furniture, fixtures and
office equipment 5 - 10 years
Amortization of assets recorded under capital leases is
included in depreciation expense. The Company's sludge
composting facility is being depreciated over the original
contract period of 20 years. Landfill and landfill improvement
costs are amortized based upon total units of airspace filled
during the year in relation to estimated permitted airspace
capacity. Land held for future development is excluded from
amortization.
Engineering and legal fees paid to third parties incurred to
obtain a disposal facility permit are capitalized as landfill
costs and amortized over the estimated related airspace capacity.
These costs are not amortized until the permit is obtained and
operations have commenced. If the permit is denied, these costs
are charged to expense.
Other Assets: Other assets consist primarily of deposits
for, or advances to, pending or prospective acquisitions and
restricted cash and cash equivalents which are collateral for
letters of credit and bonds and restricted debt service and
construction funds. Restricted cash and cash equivalents are
$11,480,003 at December 31, 1996 and $8,366,000 at December 31,
1995.
In connection with the Company's Tax Exempt Bonds (see Note
6), restricted cash and cash equivalents in escrow total
$5,590,000 at December 31, 1995. At December 31, 1996, all funds
have been expended.
Concentrations of Credit Risk: Financial instruments that
potentially subject the Company to concentrations of credit risk
consist primarily of cash investments and accounts receivable.
The Company places its cash investments with high quality
financial institutions. Concentrations of credit risk with
respect to accounts receivable are limited because a large number
of geographically diverse customers make up the Company's
customer base. No single group or customer represents greater
than 10% of total accounts receivable. The Company controls
credit risk through credit approvals, credit limits, and
monitoring procedures.
Accrued Landfill Costs: Landfill site closure and
post-closure cost liabilities are accrued for the Company's owned
landfills based on engineering estimates of total units of
airspace filled during the year and the total closure and
post-closure costs to be incurred by the Company. Such liabilities
are not discounted or reduced by possible recoveries from third
parties.
Revenue Recognition: Landfill revenues are recorded at the
date of actual waste disposal. Revenues received prior to
services being performed are deferred and are recognized over the
service period.
Income Taxes: The Company uses the liability method in
accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on the differences
between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws
that are expected to be in effect when the differences are
expected to reverse.
Impact of Recently Issued Accounting Standards: In March
1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of ("SFAS No. 121"), which
requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121
also addresses the accounting for long-lived assets that are
expected to be disposed of. SFAS No. 121 is effective for the
Company's fiscal year ended December 31, 1996. The adoption of
this Statement did not have a material effect on the Company's
financial position or results of operations.
In October 1996, the Accounting Standards Executive
Committee of the American Institute of Certified Public
Accountants issued Statement of Position No. 96-1 ("SOP 96-1"),
Environmental Remediation Liabilities. SOP 96-1 provides
authoritative guidance on the recognition, measurement, display
and disclosure of environmental remediation liabilities.
SOP 96-1 also contains a discussion of major federal legislation
relating to environmental remediation and pollution prevention
and control. SOP 96-1 is effective for fiscal years beginning
after December 15, 1996. Although such costs are not presently
determinable, adoption of SOP 96-1 is not expected to have a
material effect on the Company's financial position and results
of operations (See Note 12).
Use of Estimates: The preparation of the Consolidated
Financial Statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the Consolidated
Financial Statements and accompanying notes. These estimates and
assumptions principally affect the Company's accruals for
landfill costs and accounts receivable reserve, the amortization
periods for intangible assets and landfill and landfill
improvement costs. Actual results could differ from those
estimates.
Stock-Based Compensation: The Company accounts for its stock
compensation arrangements under the provisions of APB Opinion No.
25, "Accounting for Stock Issued to Employees." Since the stock
options are granted by the Company at the fair value of the
shares at the date of grant, no compensation expense is
recognized in the Consolidated Financial Statements (see Note 9).
Note 3 - Acquisitions
On June 28, 1996, the Company issued 730,765 shares of its
Common Stock for all of the outstanding shares of common stock of
Salinas Disposal Service, Inc., Rural Dispos-All Service, Inc.
and Madison Lane Properties, Inc. (the "Salinas Companies"), a
group of affiliated companies that comprise an integrated solid
waste management company. This transaction has been accounted
for as a pooling-of-interests and, accordingly, the Consolidated
Financial Statements have been restated for all periods presented
to include the accounts of the Salinas Companies.
On September 29, 1995, the Company issued 2,252,946 shares
of its Common Stock for all of the outstanding shares of common
stock of Carmel Marina Corporation, Neal Road Landfill
Corporation, Jolon Road Landfill Corporation, Cal Sanitation
Services, Inc., Portable Site Services, Inc. and certain real
estate assets (the "Carmel Marina Companies"), a group of
affiliated companies that comprise an integrated solid waste
management company. This transaction has been accounted for as a
pooling-of-interests and, accordingly, the Consolidated Financial
Statements have been restated for all periods presented to
include the accounts of the Carmel Marina Companies.
Separate revenue and pro forma net income of United the
Carmel Marina Companies and the Salinas Companies prior to the
respective combinations are as follows:
Carmel
Marina Salinas
United(1) Companies Companies Combined
Year ended
December 31,
1995
Revenues $211,790,224 $16,586,538 $228,376,762
Pro forma net
income 25,987,769 842,315 26,830,084
Year ended
December 31,
1994
Revenues 106,551,057 $21,977,708 17,513,758 146,042,523
Pro forma net
income 15,557,488 1,509,387 1,878,051 18,944,926
_______________
(1) The data with respect to United for the year ended December
31, 1994, is prior to restatement for the acquisitions of
the Carmel Marina Companies and the Salinas Companies. The
data with respect to United for the year ended December 31,
1995, is after restatement for the acquisition of the Carmel
Marina Companies, but prior to restatement for the
acquisition of the Salinas Companies.
During September 1996, the Company issued 579,857 shares of
its Common Stock for the acquisition of three solid waste
management companies. During December 1996, the Company issued
178,701 shares of its Common Stock for the acquisition of two
solid waste management companies. These transactions were
accounted for as poolings-of-interests; however, these
acquisitions were not material to the Company's consolidated
operations and financial position and, therefore, the
accompanying 1995 and 1994 Consolidated Financial Statements have
not been restated.
The acquisitions discussed below have been accounted for as
purchases and, accordingly, the results of their operations have
been included in the Company's results of operations from their
respective acquisition dates. The purchase prices have been
allocated to the assets acquired and liabilities assumed based on
their respective fair values at their respective acquisition
dates. Contingent purchase price is capitalized when earned and
amortized over the remaining life of the related asset.
During December 1996, the Company purchased outstanding
stock and certain assets of the I-5 Companies, which are
comprised of two landfill operating contracts, one collection
company and two transfer stations. The consideration was
comprised of $21,000,000 in cash and certain additional assumed
liabilities.
During January 1996, the Company purchased all of the
outstanding stock of Commercial Disposal Co., Inc. which is
comprised of a collection company and two transfer stations. The
aggregate consideration was $16,126,500 in cash.
The total initial consideration for other acquisitions that
the Company made in 1996 was approximately $119,466,000 in cash,
approximately $1,390,000 in seller notes, 109,673 shares of the
Company's Common Stock, warrants to purchase 65,000 shares of the
Company's Common Stock and contingent consideration not to exceed
$15,950,000.
During September 1995, the Company purchased the outstanding
stock and certain assets of the Partyka Resource Companies, which
comprise two solid waste landfills and collection operations.
The aggregate initial consideration was $36,424,609 in cash, $6
million in seller notes and 184,200 shares of the Company's
Common Stock. Contingent royalty payments of $5.95 per ton are
due for each ton received at the landfills commencing October
1995 (subject to a cap of $10,577,773).
During September 1995, the Company purchased all of the
outstanding stock of the Zenith Kremer Companies, which are
comprised of a collection company and two transfer station
permits. The aggregate consideration was $19,158,320 in cash.
During February 1995, the Company purchased all of the
outstanding stock of Waste Systems Corporation and certain assets
of WasteCo, Inc., which together are comprised of a solid waste
landfill and collection operations. The aggregate initial
consideration was $12,326,396 in cash and 280,000 shares of the
Company's Common Stock. Contingent royalty payments of $1.15 per
ton are due for each ton received at the landfill (not to exceed
$8 million in aggregate). An additional contingent purchase
payment of $750,000 was paid in 1996 upon receipt of a permit
modification increasing daily and annual tonnage limits that may
be accepted by the landfill, and an additional contingent
purchase payment of $1,000,000 was paid in 1996 upon the receipt
of another permit modification from required regulatory agencies
authorizing additional landfill capacity.
The total initial consideration for other acquisitions that
the Company made in 1995 was approximately $91,200,000 in cash,
approximately $5,900,000 in seller notes, 464,398 shares of the
Company's Common Stock and contingent consideration not to exceed
$19,200,000.
During August 1994, the Company purchased all of the
outstanding stock of Pete's Disposal Service, Inc., a collection
company that provides solid waste collection services. The
aggregate initial consideration was $4,800,000 in cash.
Contingent consideration of $347,896 in cash was paid in January
1995 related to certain contractual obligations for billing
retentions.
During June 1994, the Company purchased all of the
outstanding stock of PRTR, Inc., a company that operates a
transfer station. The aggregate initial consideration was
$4,225,846 in cash. Contingent royalty payments of $1 per ton
(subject to $.75 increases on the fifth and tenth anniversary
dates of the transaction) for each ton received in excess of 100
tons per day are payable quarterly (subject to a cap of $125,000
per year and $1,300,000 in aggregate).
During April 1994, the Company purchased substantially all
of the assets of Orlando Trucking, Inc., a collection company.
The aggregate initial consideration was $3,970,000 in cash.
During March 1994, the Company purchased all of the
outstanding stock of Kent Industrial Services, Inc., a collection
company. The aggregate initial consideration was $5,000,000 in
cash.
During January 1994, the Company purchased all of the
outstanding stock of Harland's Sanitary Landfill, Inc. and
purchased substantially all of the assets of Harland's Disposal
Service, Inc. These companies are comprised of solid waste
landfill and collection operations. The initial aggregate
purchase price was $4,170,000 in cash. Contingent royalty
payments of $1.50 per ton commence on the ninth anniversary of
the transaction.
The total consideration for other acquisitions that the
Company made in 1994 was $2,652,291 in cash and $1,363,000 in
seller notes.
The Company has not completed its valuation of certain of
its 1996 purchases and the purchase price allocations are subject
to change when additional information concerning asset and
liability valuations are completed.
The following table summarizes, on an unaudited pro forma
basis, the combined results of operations of the Company for the
years ended December 31, 1996 and 1995 as though each acquisition
described above (excluding certain of such acquisitions that were
not material individually or in the aggregate) was made on
January 1, 1995.
1996 1995
Revenues $ 360,469,429 $ 322,428,781
Pro forma net income 34,960,904 28,169,023
Pro forma primary earnings
per common and common
equivalent share $.88 $.81
Pro forma fully diluted earnings
per common and common
equivalent share $.87 $.80
The unaudited pro forma results are based upon certain assumptions and
estimates which are subject to change. These results are not necessarily
indicative of the actual results of operations that might have occurred,
nor are they necessarily indicative of expected results in the future.
Note 4 - Property and equipment
A summary of property and equipment is as follows:
December 31
1996 1995
Landfills $ 224,413,867 $ 181,685,044
Land and improvements 22,350,398 14,529,438
Buildings and improvements 34,713,450 22,626,762
Sludge composting facility 11,675,853 11,675,853
Vehicles and equipment 160,422,300 102,582,170
December 31
1996 1995
Furniture, fixtures and
office equipment 5,381,978 3,243,833
Construction in progress 23,429,792 11,901,845
482,387,638 348,244,945
Less accumulated depreciation and
amortization (94,407,414) (58,866,599)
Net property and equipment $ 387,980,224 $ 289,378,346
Landfill amortization totaled $11,176,704, $6,986,922 and $3,573,196
for the years ended December 31, 1996, 1995 and 1994, respectively.
Depreciation expense totaled $18,009,022, $9,971,936 and $5,447,329 for the
years ended December 31, 1996, 1995 and 1994, respectively.
The Company capitalizes interest as a component of the cost of
property and equipment for construction projects that take considerable
time and expenditures. Interest capitalized, primarily related to landfill
cell construction, in 1996, 1995 and 1994 amounted to $1,682,000,
$1,349,000 and $722,000, respectively.
Note 5 - Intangible assets
Intangible assets consist of the excess of cost over the value of
identifiable net assets of businesses acquired and other intangible assets.
Excess of cost over value of identifiable net assets of businesses acquired
are being amortized on a straight line basis over forty years while other
intangible assets are being amortized on a straight line basis for periods
ranging from three to ten years.
December 31
1996 1995
Excess of cost over value of
identifiable net assets of
businesses acquired $ 293,462,083 $ 171,957,922
Other intangible assets 8,621,997 8,520,001
302,084,080 180,477,923
Less accumulated amortization (15,232,403) (8,738,726)
Intangible assets, net $ 286,851,677 $ 171,739,197
The Company continually evaluates the value and future benefits of its
intangibles. The Company assesses recoverability from future operations
using income from operations of the related acquired business as a measure.
Under this approach, the carrying value would be reduced if it becomes
probable that the Company's best estimate for expected future cash flows of
the related business would be less than the carrying amount of the
intangible over the remaining amortization period. For the three year
period ended December 31, 1996, there were no adjustments to the carrying
amounts of intangibles resulting from these evaluations.
Note 6 - Long-term debt
Long-term debt consists of the following:
December 31
1996 1995
Credit Facility $ 31,450,000 $ 41,800,000
Convertible Subordinated Notes
at 4 1/2% per annum, due
June 1, 2001, convertible
to Common Stock at $32.50
per share 150,000,000
Senior secured notes, interest
payment semi-annually, at 7.67%
per annum, annual principal
payments beginning September 1999,
due September 2005 75,000,000 75,000,000
Tax exempt bonds, monthly interest
payments at variable rates
(4.25% and 5.15% at December 31,
1996 and 1995, respectively),
due April 2010 22,500,000 22,500,000
Promissory note, quarterly interest
payments, at 8% per annum, due
September 2001 6,000,000 6,000,000
December 31
1996 1995
Subordinated promissory notes,
monthly interest payments at 8 1/2%
per annum due April 2000 3,000,000 3,000,000
Other (interest rates ranging from
3.07% to 14.7%) 19,418,532 13,238,067
307,368,532 161,538,067
Less current portion (4,664,413) (5,344,096)
$ 302,704,119 $ 156,193,971
The Company's credit facility was amended in December 1996
to, among other things, eliminate certain covenants and lower
borrowing costs. The credit facility as so amended (the "Credit
Facility") provides for a $190 million, three year, secured
revolving credit facility due December 1999. Outstanding loans
under the Credit Facility bear interest at a rate per annum equal
to the Eurodollar Rate (Reserve Adjusted) (as defined in the loan
agreement providing for the Credit Facility) applicable to each
interest period plus 0.625% to 1.25% per annum or the Alternate
Reference Rate (as defined) from time to time in effect. At
December 31, 1996 and 1995, the weighted average interest rate
was 6.98% and 7.15%, respectively. The Credit Facility also
allows the Company to obtain up to $90 million in letters of
credit. The aggregate amount that the Company is permitted to
borrow under the Credit Facility is reduced by the aggregate face
amount of all outstanding letters of credit issued thereunder.
The Credit Facility is secured by the stock of the Company's
subsidiaries, restricts the Company from granting other liens on
its assets (subject to certain limited exceptions), and requires
the Company to comply with certain covenants including, but not
limited to, maintenance of certain financial ratios, limitations
on additional indebtedness, limitations on capital expenditures
and a prohibition on the Company's payment of cash dividends on
its Common Stock. The Credit Facility also currently requires
that the consent of the lenders be obtained in order for the
Company to make an acquisition that provides for an aggregate
cash purchase price of $50 million or more. In addition, the
Credit Facility prohibits the Company from using more than $15
million of its cash to secure closure and post-closure
obligations that the Company may have relating to its landfills
(see Note 13).
In June 1996, the Company issued $150 million principal
amount of 4-1/2% Convertible Subordinated Notes due June 1, 2001
(the "Convertible Notes"). The Convertible Notes bear interest
at a fixed rate of 4-1/2% per annum, payable semi-annually. The
Convertible Notes are convertible into Common Stock of the
Company at a conversion price of $32.50 per share. The
Convertible Notes are unsecured obligations of United Waste
Systems, Inc. and are subordinated to all existing and future
Senior Indebtedness (as defined in the indenture relating to the
Convertible Notes) of United Waste Systems, Inc. and are
effectively subordinated to all indebtedness and other
liabilities of the subsidiaries of the Company.
In April 1995, $22.5 million in principal amount of Variable
Rate Demand Limited Obligation Revenue Bonds (the "Tax Exempt
Bonds") were issued for the benefit of the Company by a corporate
body organized under the laws of the State of Michigan. The Tax
Exempt Bonds mature on April 1, 2010 and bear interest at a
variable rate unless the Company elects a fixed rate in
accordance with the terms of the Tax Exempt Bonds. If a variable
rate is in effect, this rate is set periodically at a level (not
to exceed 12% per annum) that would enable the Tax Exempt Bonds
to be resold at a price equal to their principal amount plus all
accrued interest thereon.
In September 1995, the Company issued $75 million in Senior
Secured Notes due September 1, 2005 (the "Notes"). The Notes
bear interest at a fixed rate of 7.67% per annum; interest is
payable semi-annually and annual principal payments in the amount
of $10.7 million are due beginning September 1999. The Notes are
secured pari passu with the Credit Facility and any event of
default under the Credit Facility also constitutes an event of
default under the Notes. The Notes require the Company to comply
with certain covenants including, but not limited to, maintenance
of certain financial ratios, limitation on additional
indebtedness and prohibition on the Company's payment of cash
dividends on any of its capital stock.
Maturities of the Company's long-term debt for each of the
next five years at December 31, 1996 are as follows:
1997 $4,664,413
1998 5,564,456
1999 52,167,791
2000 11,406,981
2001 17,200,242
Thereafter 216,364,649
Note 7 - Nonrecourse Sewage Facility Revenue Bonds
The Company's nonrecourse sewage facility revenue bonds (the
"Revenue Bonds") are obligations of a wholly-owned subsidiary of
the Company and are collateralized solely by the subsidiary's
interest in a sludge composting facility, revenue derived from
such facility and by certain bond funds held in trust. The
Revenue Bonds are nonrecourse and, therefore, the subsidiary and
its affiliates, including, but not limited to, United Waste
Systems, Inc. and subsidiaries, are not liable for any payment
due on the Revenue Bonds, nor any claim based on, or in respect
to, the Revenue Bond's indenture. Annual principal payments on
the Revenue Bonds range from $400,000 to $1,100,000 through 2010
at final maturity and interest is payable semi-annually at a
fixed rate of 9.25% per annum.
Note 8 - Income Taxes
Certain of the companies acquired by United in transactions
accounted for as poolings-of-interests (see Note 3) had elected
to be treated as Subchapter S Corporations or partnerships prior
to being acquired. In general, the income or loss of a
Subchapter S Corporation or partnership is passed through to its
owners rather than being subjected to taxes at the entity level.
Pro forma net income or loss reflects a provision for income
taxes on a pro forma basis for all periods presented as if all
such companies were liable for federal and state income taxes as
taxable corporate entities for all periods presented. The
offsetting credits to the pro forma income tax provisions are
reflected as an increase in retained earnings.
The provision for pro forma federal and state income taxes
is as follows:
December 31
1996 1995 1994
Historical income taxes:
Current State $ 3,135,854 $ 1,546,649 $ 546,230
Current Federal 12,063,062 10,228,961 5,575,607
Deferred State 1,607,625 660,890 181,636
Deferred Federal 8,449,744 3,198,484 1,640,550
(Benefit) for deferred
taxes of Subchapter S
Corporation at time
of pooling (314,086)
25,256,285 15,320,898 7,944,023
Pro forma tax adjustment:
December 31
1996 1995 1994
State 78,744 310,142 450,095
Federal 284,537 1,148,219 1,614,678
363,281 1,458,361 2,064,773
$25,619,566 $ 16,779,259 $ 10,008,796
A reconciliation of the provision for pro forma income taxes
and the amount computed by applying the statutory federal income
tax rates of 35% for 1996, 1995 and 1994 to income before taxes
is as follows:
December 31
1996 1995 1994
Computed tax at statutory
tax rate $21,227,177 $15,263,270 $10,133,803
Increase (decrease)
in taxes:
Change in valuation
allowance (270,480) (35,978) (472,306)
Nondeductible expense
(primarily
intangibles 1,613,019 992,663 230,994
State income taxes, net
of federal tax
benefit 3,134,444 1,636,493 658,546
(Benefit) for deferred
taxes of Subchapter S
Corporation at
time of pooling (314,086)
Other (84,594) (763,103) (542,241)
$25,619,566 $ 16,779,259 $ 10,008,796
The components of deferred income tax liabilities and assets
are as follows:
December 31
1996 1995
Deferred income tax
liabilities:
Property, equipment
and intangibles $ 47,972,712 $ 42,593,903
Deferred income
tax assets:
Accounts receivable
allowance 770,304 921,905
Accrued liabilities 6,961,902 1,861,550
Closure reserves 10,405,684 8,090,566
December 31
1996 1995
Net operating loss
carryforwards 2,047,551 1,131,158
Other 64,004
Total deferred income
tax assets 20,185,441 12,069,183
Valuation allowance (270,480)
$ 20,185,441 $ 11,798,703
The Company recognized certain tax benefits related to its
stock option plan in the amount of $16,682,688 and $1,754,177 in
1996 and 1995, respectively. At December 31, 1996, these
benefits were recorded as income taxes receivable, which is
reflected in the balance sheet as an increase in prepaid expenses
and other current assets and, an increase in additional paid-in
capital. At December 31, 1995, these benefits were recorded as a
reduction of income taxes payable, and reflected in the balance
sheet as a reduction in accrued expenses and other current
liabilities, and an increase in additional paid-in capital.
The Company has net short-term deferred tax assets in the
amount of $8,847,338 and $2,842,000, at December 31, 1996 and
1995, respectively, which are reported in the balance sheet in
prepaid expenses and other current assets.
At December 31, 1996, the Company has net operating loss
carryforwards ("NOLs") of $14,111,425 for federal and $17,504,221
for state income tax purposes that expire in years 1997 through
2011. A portion of the NOLs resulted from the Company's
acquisitions discussed in Note 3 and such NOLs are limited to the
future taxable earnings of their related acquired businesses. At
December 31, 1996, the Company has refundable income taxes in the
amount of $9,591,911. This consists of $4,739,903 representing a
carryback of losses and $4,852,008 representing federal and state
payments for future liabilities.
Note 9 - Capital Stock
Common Stock: On May 30, 1996, the stockholders of the
Company approved an amendment to the Company's Certificate of
Incorporation that increased the authorized shares of Common
Stock of the Company to 75,000,000 shares. On March 12, 1996,
the Board of Directors approved a two-for-one stock split of the
Company's Common Stock to be effected in the form of a 100% stock
dividend. Such stock split was effected by the distribution on
June 18, 1996, of a dividend of one share of the Company's Common
Stock in respect of each share of Common Stock that was
outstanding on June 7, 1996, the record date established for such
distribution. All agreements concerning stock options,
convertible securities and other commitments payable in shares of
the Company's Common Stock were amended pursuant to their own
terms to provide for the issuance of two shares of Common Stock
for every one share that was issuable prior to the stock split.
At December 31, 1996, approximately 9,176,552 shares of
Common Stock are reserved for the exercise of warrants, options
and the conversion of certain debt.
Preferred Stock: The Company's board of directors has the
authority to designate 5,000,000 shares of $.001 par value
preferred stock in series, to establish as to each series the
designation and number of shares to be issued and the rights,
preferences, privileges and restrictions of the shares of each
series, and to determine the voting powers, if any, of such
shares. At December 31, 1996, the Company's Board of Directors
had designated 3,440,990 shares, of which 336,621 shares are
available for future issuance.
Common Stock Options and Warrants: During July 1992, the
Company adopted the 1992 Stock Option Plan for the grant of
incentive stock options and non-statutory stock options. The
aggregate number of shares of Common Stock which may be subject
to options granted under the plan may not exceed 5,900,000,
subject to adjustment under certain circumstances. The exercise
price, subject to certain minimums, vesting periods and other
conditions applicable to each option granted, are generally
determined by two disinterested directors on the Compensation
Committee of the Board of Directors.
Also during July 1992, the Company adopted a 1992
Disinterested Director Stock Option Plan for the grant of
non-statutory options for certain directors of the Company. The
plan provides for a fixed number of options to be issued annually
for each participant with exercise prices at current market value
and these options vest immediately.
The Company has various other stock option plans for
employees other than officers or directors. These plans have
terms similar to those of the Company's 1992 Stock Option Plan.
During 1996, the Company granted 1,983,368 stock options
with a weighted-average exercise price of $26.92 per share.
During 1996, 2,562,698 options (with a weighted-average exercise
price per share of $10.06) were exercised and 17,829 options
(with a weighted-average exercise price per share of $13.97) were
forfeited. The weighted-average grant date fair value of
options granted during 1996 was $6.52 per share.
At December 31, 1996, 3,588,091 options to purchase shares
of the Company's Common Stock were outstanding. The weighted
average exercise price per share of such options was $19.91.
Such options had exercise prices ranging from $5.06 to $36.25 per
share. Of such options, 816,018 provided for an exercise price
per share in the range of $5.06 to $10.00 (the weighted average
exercise price and weighted average remaining life of the options
in this range being $8.08 and 6.9 years, respectively); 1,107,158
provided for an exercise price per share in the range of $10.01
to $20.00 (the weighted average exercise price and weighted
average remaining life of the options in this range being $16.48
and 8.6 years, respectively); and 1,664,915 provided for an
exercise price per share in the range of $20.01 to $36.25 (the
weighted average exercise price and weighted average remaining
life of the options in this range being $27.98 and 9.7 years,
respectively).
At December 31, 1996, 1,424,954 of the Company's outstanding
options were exercisable. The weighted average exercise price
per share of such exercisable options was $17.89. Of such
options, 479,682 provided for an exercise price per share in the
range of $5.06 to $10.00 (the weighted average exercise price of
the options in this range being $7.78); 360,995 provided for an
exercise price per share in the range of $10.01 to $20.00 (the
weighted average exercise price per share of the options in this
range being $15.65); and 584,277 provided for an exercise price
per share in the range of $20.01 to $36.25 (the weighted average
exercise price of the options in this range being $27.58).
At December 31, 1996, the Company had 973,076 stock purchase
warrants outstanding with an exercise price per share ranging
from $2.61 to $34.75, all of which were currently exercisable.
Such warrants expire through the year 2006.
At December 31, 1995, the Company had 4,185,250 stock
options outstanding with exercise prices per share ranging from
$5.06 to $19.00, with a weighted-average exercise price of $10.69
of which 3,063,584 options were exercisable. During 1995,
447,140 stock options were exercised with exercise prices per
share ranging from $5.25 to $17.19. Also at December 31, 1995,
the Company had 1,247,328 stock purchase warrants outstanding
with exercise prices per share ranging from $2.61 to $12.50, all
of which were currently exercisable, and expire through the year
2002.
At December 31, 1994, the Company had 3,235,242 stock
options outstanding with exercise prices per share ranging from
$5.06 to $12.00. During 1994, 672,844 stock options were
exercised with exercise prices per share ranging from $4.05 to
$9.00. Also at December 31, 1994, the Company had 1,631,214
stock purchase warrants outstanding with exercise prices per
share ranging from $.03 to $7.71, all of which were currently
exercisable, and such warrants expire through the year 2002.
The Company applies Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" in accounting for
stock-based employee compensation arrangements whereby no
compensation cost related to stock options is deducted in
determining net income. Had compensation cost for the Company's
stock option plans been determined pursuant to Financial
Accounting Standards Board Statement No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," the Company's pro
forma net income and earnings per share would have differed. The
Black-Scholes option pricing model estimates fair value of
options using subjective assumptions which can materially effect
fair value estimates and, therefore, do not necessarily provide a
single measure of fair value of options. Using the Black-Scholes
option pricing model for all options granted after December 31,
1994 and a risk-free interest rate of 5.75%, a volatility factor
for the market price of the Company's Common Stock of .315 and a
weighted-average expected life of options of approximately three years, the
Company's pro forma net income, primary pro forma earnings per
share and fully-diluted pro forma earnings per share would have
been $32,338,165, $.81 and $.81, respectively, for 1996
and,$26,008,749, $.75 and $.75 respectively, for 1995. For
purposes of these pro forma disclosures, the estimated fair value
of options is amortized over the options' vesting period. Since
the number of options granted and their fair value may vary
significantly from year to year, the pro forma compensation
expense in future years may be materially different.
Note 10 - Earnings Per Share
Primary and fully diluted earnings per common share for the
year ended December 31, 1996 have been computed based upon
weighted average equivalent shares outstanding of 39,943,715 and
42,913,825, respectively.
Primary and fully diluted earnings per common share for the
year ended December 31, 1995 have been computed based upon
weighted average equivalent shares outstanding of 34,693,501 and
34,898,801, respectively.
Primary and fully diluted earnings per common share for the
year ended December 31, 1994 have been computed based upon
weighted average equivalent shares outstanding of 26,076,421 and
29,153,689, respectively. Primary earnings per share was
calculated after giving effect to net deductions from income
available to common stockholders of $1,275,180 related to
dividends on preferred stock.
Note 11 - Fair Value of Financial Instruments
The following methods and assumptions were used by the
Company in estimating the fair value disclosures for financial
instruments:
Cash and cash equivalents: The carrying amount reported in
the balance sheet for cash and cash equivalents approximates fair
value.
Restricted cash: The $11,480,003 carrying amount reported in
the balance sheet included in other assets for restricted cash
and cash equivalents approximates fair value.
Long and short-term debt: The carrying amount of the
Company's borrowings under its revolving credit agreement
approximates fair value. The Convertible Notes traded at 115% of
face value at December 31, 1996 and therefore the $150 million
face amount of the Convertible Notes have a fair value of $173
million. The fair values of the other long and short-term debt
are estimated based on the Company's incremental borrowing rates
for similar types of borrowing arrangements. These carrying
amounts approximate fair value.
Note 12 - Commitments and Contingencies
The Company leases various office space and equipment under
noncancellable operating leases expiring on various dates through
2004. The Company leases equipment with a cost of $2,422,984 and
$5,981,710 and cumulative amortization of approximately $504,060
and $1,547,133 under various capital leases at December 31, 1996
and December 31, 1995, respectively.
The following is a schedule of future minimum lease payments
under capital leases and noncancellable operating leases with
initial terms in excess of one year as of December 31, 1996:
Noncancellable
Capital Operating
December 31 Leases Leases
1997 $ 905,876 $ 1,257,322
1998 260,955 982,840
1999 113,589 375,242
2000 35,160 295,699
Noncancellable
Capital Operating
December 31 Leases Leases
2001 - 275,000
Thereafter - 709,202
Total minimum
lease payments 1,315,580 $ 3,895,305
Less amount
representing
interest (95,756)
Present value of net
minimum lease payments 1,219,824
Less current
portion (846,528)
Long-term portion $ 373,296
Rent expense under noncancellable operating leases for the
years ended December 31, 1996, 1995 and 1994 was $1,044,995,
$435,008 and $428,233, respectively.
During 1995, the Company acquired a company which had a
contingent lease agreement with respect to a portion of the land
related to one of its solid waste landfills. Payments under this
lease agreement are based upon 50% of the net cash receipts (as
defined in the lease agreement) of the landfill and are payable
monthly. For the year ended December 31, 1996 and 1995 the
related lease expense totaled $751,000 and $243,000,
respectively.
The Company owns and operates a waste water sludge
composting plant located in Springfield, Massachusetts. During
1992, the Company entered into a 20-year service agreement with
the City of Springfield under which the Company treats sewage
sludge generated at the Springfield Regional Wastewater Treatment
Facility.
While the Company carries a wide range of insurance coverage
for the protection of the Company's assets and operations, the
Company does not carry insurance coverage for environmental
liability, except as described in the following sentence. The
Company's insurance coverage for environmental liability is
limited to (i) over-the-road environmental liability protection
for the transportation of asbestos-containing material, (ii)
contractor pollution liability insurance that relates to certain
environmental services provided by the Company and (iii) certain
other pollution liability insurance which is the equivalent to
self-insurance because under the terms thereof the Company is
required to fully reimburse the insurance company for any paid
claims. In the event uninsured losses occur, the Company's net
income and financial position could be materially adversely
affected.
On January 9, 1996, the Junker Landfill Trust sued the
Company, Junker Sanitation Services, Inc., and United Waste
Transfer, Inc., both of which are subsidiaries of the Company,
and approximately 800 other parties in the United States District
Court for the Western District of Wisconsin, Case No. 96C-19S,
for the contribution under the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA"), as well as
state common law, with respect to the Junker Landfill site in
Hudson, Wisconsin. By order entered July 19, 1996, the court
approved a consent decree which was signed by the Company and
others with respect to this site. The Company's obligations
under the consent decree are secured by, and limited to, certain
indemnification rights which the Company has against the former
owner of Junker Sanitation Services, Inc. A Settlement Agreement
has been reached with the Plaintiff which involves no payment
obligation on the part of Junker Sanitation Services, Inc.,
United Waste Systems, Inc., or United Waste Transfer, Inc. That
settlement will become complete when the Court approves a second
consent decree, which approval is expected at a hearing scheduled
for April 29, 1997.
On May 26, 1995, the Company sued Robert Foley and Matthew
Parzych in the United States District Court for the District of
Connecticut, Case No. 3:95-CV-985. The defendants sold stock in
certain Massachusetts corporations to the Company under an
agreement dated April 1, 1992 (the "1992 agreement"). In the
suit the Company seeks approximately $1,115,000 in cash and
securities from an escrow account and additional amounts from
defendants by reason of indemnity provisions contained in the
1992 agreement and confirmed in an agreement dated January 28,
1994 (the "1994 agreement"). The defendants have counterclaimed
against the Company and its chief executive officer, seeking to
invalidate the 1994 agreement primarily for alleged lack of
consideration and economic duress, and to receive alleged damages
and costs. The counterclaims for damages are primarily for
alleged misrepresentations by the Company in connection with the
1992 agreement, and were asserted by defendants notwithstanding
provisions in the 1994 agreement which generally released the
Company from all claims. The Company intends vigorously to
pursue its claims in this action and to seek dismissal of the
counterclaims. In the opinion of management, this claim should
not materially affect the financial position of the Company.
In June 1996, Dale Lynch, Dennis Lynch and D.L. Lynch sued
the Company, its chief executive officer and a subsidiary of the
Company in the Circuit Court of Whitley County, Kentucky (Index
No. 96 CI 00355). The subsidiary purchased the Tri-County
landfill from the plaintiffs in 1991. The suit primarily seeks
compensatory and punitive damages for alleged breach of contract
and for allegedly fraudulent representations in connection with
this purchase. The Company has filed a Counterclaim for breach
of warranties and fraud. The Company has also sought
indemnification for breach of warranties. In January 1997, the
plaintiffs filed an Amended Complaint, which seeks relief similar
to that of their original Complaint. The Company intends to file
a Motion to Dismiss seven of the eight counts in the Complaint,
including the fraud count. The Company has served discovery
requests and deposition notices on plaintiffs and intends to
vigorously defend against plaintiffs' claims and prosecute its
Counterclaim. In the opinion of management, this suit should not
materially affect the financial position of the Company.
In July 1996 the Company filed suit against H.A.M. Sanitary
Landfill, Inc. and its shareholders. The suit is now pending in
the Circuit Court for Monroe County, West Virginia, Civil Action
No. 96-C-51. The Company, among other things, seeks to recover
$1.8 million in advances which the Company made in connection
with an agreement, since terminated, to purchase the H.A.M.
Sanitary Landfill in West Virginia from the defendants, and to
recover certain personal property. The defendants in September
1996 filed a counterclaim against the Company and a subsidiary
which seeks compensatory and punitive damages for claims of
alleged breach of contract, breach of fiduciary duty under an
alleged joint venture, unjust enrichment and fraud. The Company
will vigorously prosecute its claim and defend against the
counterclaim. In the opinion of management, the counterclaim
should not materially affect the financial position of the
Company.
The Company accrues the costs for closure and postclosure
monitoring over the life of its owned landfills and will pay out
these costs over the next fifty years. Major components of these
costs include closure cap construction, leachate treatment and
groundwater monitoring. The Company accrues these costs
utilizing engineering estimates based on current governmental
regulations regarding closure requirements. The Company
estimates that the aggregate liability for the closure,
postclosure and remediation costs of its landfills owned at
December 31, 1996 will be approximately $66.6 million. At
December 31, 1996, the Company has approximately $49.5 million of
these costs accrued and, therefore, has accrued approximately
74.3% of its estimated total costs to date.
The Company monitors the availability of airspace at each of
its landfills and the need to obtain permit modifications for
approvals for expansion in order to continue operating these
landfills. In order to develop and operate a landfill, a
composting facility or transfer station, or other solid waste
management facility, the Company typically must go through
several governmental review processes and obtain one or more
permits and often zoning or other land use approvals. Once
obtained, operating permits generally must be periodically
renewed and are subject to modification and revocation by the
issuing agency. There can be no assurance that the Company will
succeed in obtaining these permits, permit modifications or
approvals.
The Company has outstanding letters of credit with banks
of approximately $61,311,000 at December 31, 1996. The letters
of credit were obtained as collateral for the Company's Tax
Exempt Bonds, self-fund insurance programs and as direct
collateral to assure compliance with governmental sanitary
landfill closure and post-closure obligations for landfills.
Note 13 - Subsequent Events
Subsequent to December 31, 1996, the Company completed the
acquisition of 13 solid waste businesses - these businesses
include one landfill, 12 collection operations and one transfer
operation. These acquisitions were accounted for as purchases.
Also, subsequent to December 31, 1996, the Company issued Common
Stock for all of the outstanding stock of a solid waste business
which includes one collection and one transfer operation. This
transaction has been accounted for as a pooling-of-interests.
The historical operations of this business are not material to
the Company's consolidated operations and financial position and,
therefore, no restatement of the accompanying Consolidated
Financial Statements was necessary.
During March 1997, the Company completed a public offering
of 3,450,000 shares of its Common Stock. Net proceeds of the
offering were approximately $119.3 million. Approximately $47.2
million of such proceeds have been used to reduce outstanding
indebtedness under the Company's Credit Facility. At March 25,
1997, the Company has cash and cash equivalents of approximately
$69.0 million.
<TABLE>
UNITED WASTE SYSTEMS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Additions
Charged
Balance to
at Costs Balance
Beginning and at end of
of Period Expenses Other(1) Deductions(2) Period
<S> <C> <C> <C> <C> <C>
Year ended December
31, 1996:
Allowance for
doubtful accounts $ 2,249,324 $1,713,711 $ 1,353,986 $2,240,834 $3,076,187
Year ended December
31, 1995:
Allowance for
doubtful accounts $ 1,949,479 $1,487,163 $ 244,048 $1,431,366 $2,249,324
Year ended December
31, 1994:
Allowance for
doubtful accounts $ 1,830,792 $1,032,149 $ 140,000 $1,053,462 $ 1,949,479
</TABLE>
(1) Consists of reserves assumed through acquisitions in 1996,
1995 and 1994, respectively.
(2) Uncollectible accounts written-of, net of recoveries.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information set forth under the captions "Election of
Directors" and "Compliance with Section 11(A) of the Securities
Exchange Act of 1934" in the Company's definitive Proxy Statement
for its 1997 Annual Meeting of Stockholders, to be filed pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as
amended, prior to April 30, 1997 (the "1997 Proxy Statement"), is
incorporated herein by reference.
Item 11. Executive and Director Compensation
The information set forth under the captions "Executive and
Director Compensation" and "Compensation Committee Interlocks and
Insider Participation" in the 1997 Proxy Statement is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the
1997 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the
1997 Proxy Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements and Schedule, and
Reports on Form 8-K
(a)(1) Consolidated Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1996 and
1995
Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
Schedules other than those listed are omitted as they are not
applicable or the required or equivalent information has been
included in the financial statements or notes thereto.
(a)(3) Exhibits
Unless otherwise indicated, all exhibits are hereby
incorporated by reference to United Waste Systems, Inc.'s
Registration Statement on Form S-1 Commission File No. 33-53488.
Following the description of each exhibit that is incorporated by
reference to such Registration Statement is a number in
parenthesis. This number indicates the exhibit number by which
such exhibit is identified in such Registration Statement.
3.1 Exhibit 3.1 - Amended and Restated Certificate of
Incorporation dated October 31, 1991, as amended by (i)
Certificate of Increase of Designated Number of Shares
of Series B Cumulative Convertible Preferred stock
dated March 31, 1992, (ii) Certificate of Correction to
Amended and Restated Certificate of Incorporation dated
April 30, 1992, (iii) Certificate of Amendment to
Certificate of Incorporation dated October 9, 1992,
(iv) Certificate of Change of Location of Registered
Office and Registered Agent dated January 28, 1993,
(v) Certificate of Amendment to Certificate of
Incorporation dated August 31, 1993, and (vi)
Certificate of Amendment to Certificate Incorporation
dated June 12, 1996 (incorporated by reference to
Exhibit 4.1 to the Registration Statement on Form S-8
Commission File No. 333-14489).
3.2 By-laws. (3.5)
4.1 Fourth Amended and Restated Credit Agreement dated as
of December 5, 1996 among United Waste Systems, Inc.,
various financial institutions, the First National Bank
of Boston as co-agent and Bank of America Illinois, as
agent. (Incorporated by reference to Exhibit 99 to the
Registrant's current report on Form 8-K dated December
5, 1996).
4.2 Mortgage, Loan and Trust Agreement dated as of August
1, 1989 among Massachusetts Industrial Finance Agency,
Resource Control Composting, Inc. and State Street Bank
and Trust Company, as trustee. (4.8)
4.3 Loan Agreement dated April 1, 1995 between Michigan
Strategic Fund and United Waste Systems, Inc.
(Incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form 10-Q for
the Quarterly period ended June 30, 1995).
4.4 Secured Note Agreement dated as of September 1, 1995,
among the Registrant and various parties named therein.
(Incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form 10-Q for
the Quarterly period ended June 30, 1995).
4.5 Indenture dated June 5, 1996 between the Registrant and
Bankers Trust Company, as Trustee. (Incorporate by
reference to exhibit 4.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1996).
4.6 Registration Rights Agreement dated June 5, 1996
between the Registrant and Goldman Sachs & Co. and
others (Incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30 1996).
10.1+ 1992 Stock Option Plan. (10.1)
10.2+ 1992 Disinterested Director Stock Option Plan. (10.2)
10.3 Landfill Lease Agreement dated July 1, 1988 between the
City of Lowell and Resource Control Inc., together with
a form of amendment thereto dated July 1, 1992. (10.4)
10.4 Site Lease dated as of March 20, 1989 between the City
of Springfield and Resource Control Composting, Inc.
(10.5)
10.5 Solid Waste Disposal Services Agreement dated February
12, 1992 among the City of Fitchburg, the Town of
Westminster and RCI Fitchburg, Inc. (10.6)
10.6+ Amended and Restated Employment Agreement dated June
20, 1995 between United Waste Systems, Inc. and Bradley
S. Jacobs. (Incorporated by reference to Exhibit 10.2
to the registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1995).
10.7+ Amended and Restated Employment Agreement dated June
20, 1995 between United Waste Systems, Inc. and Edward
T. Sheehan. (Incorporated by reference to Exhibit 10.6
to the registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1995).
10.8+ Amended and Restated Employment Agreement dated June
20, 1995 between United Waste Systems, Inc. and John N.
Milne. (Incorporated by reference to Exhibit 10.3 to
the registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1995).
10.9+ Employment Agreement dated September 27, 1991 between
the registrant and Richard Volonino, together with an
amendment thereto dated November 11, 1992. (10.11)
10.10+ Amended and Restated Employment Agreement dated June
20, 1995 between United Waste Systems, Inc. and Michael
J. Nolan. (Incorporated by reference to Exhibit 10.5
to the registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1995).
10.11+ Form of Indemnification Agreement entered into by the
registrant with each of its officers and directors.
(10.20)
10.12+ Agreement dated as of October 1, 1991 between the
registrant and Bradley S. Jacobs. (10.21)
10.13+ Form of Warrant dated as of October 17, 1992 issued by
the registrant to John N. Milne. (Incorporated by
reference to Exhibit No. 10.25.1 to the registrant's
Registration Statement on Form S-1, Commission File No.
33-70832)
10.14+ Form of Warrant dated as of October 17, 1993 issued by
the registrant to John N. Milne. (Incorporated by
reference to Exhibit No. 10.25.2 to the registrant's
Registration Statement on Form S-1, Commission File No.
33-70832)
10.15 Landfill Lease Agreement dated May 6, 1983 by and
between Antoinette Zielinski and Connecticut Valley
Sanitary Waste Disposal, Inc., together with addendum.
(Incorporated by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for 1995).
10.16 Asset Purchase Agreement dated as of June 13, 1991
among Ham Sanitary Landfill, Inc. MAH Equipment, Inc.,
Harry D. Humphrey, Jr., Ronald E. Mann, John H. Allen
and Jacobs Landfill, Inc., together with a form of
amendment thereto dated January, 1992. (10.69)
10.17 Merger Agreement dated September 25, 1992 among Kelly
Run Sanitation, Inc., Marino Fiore, Margaret Fiore,
Gary Fiore, Ralph Fiore and the registrant together
with an amendment thereto dated November 12, 1992.
(10.72)
10.18 Stock Purchase Agreement dated August 31, 1992 among K
& W Landfill, Inc., Roska Route, Inc., Charles Kotlaris
and United Waste Systems of Ontonagon, Inc., together
with an amendment thereto dated November 4, 1992.
(10.76)
10.19 Acquisition Agreement dated April 1, 1992 among the
registrant, Robert P. Foley, Matthew J. Parzych,
Resource Control, Inc., Martone Trucking, Inc.,
Standard Methods, Inc., Northeast Consultants, Inc.,
RCI Hudson, Inc., Resource Control Composting, Inc.,
RCI Clinton, Inc. and RCI Fitchburg, Inc. (10.77)
10.20 Second amendment to Merger Agreement dated September
25, 1992 among Kelly Run Sanitation, Inc., Marino
Fiore, Margaret Fiore, Gary Fiore, Ralph Fiore and
United Waste Systems, Inc. dated December 29, 1992.
(Incorporated by reference to registrant's Current
Report on Form 8-K dated December 18, 1992.)
10.21 Letter Agreement dated as of May 14, 1993, among United
Waste of Northwest Michigan, Inc., Edmire Leasing,
Inc., Ascione Development Company, Edward P. Ascione
and Vida J. Ascione. (Incorporated by reference to
Exhibit No. 10.87 to the registrant's Registration
Statement on Form S-1 Commission File No. 33-70832)
10.22 Asset Purchase Agreement among United Waste Systems,
Inc., United Waste of Northwest Michigan, Inc., Edmire
Leasing, Inc., Michael A. Ascione, Edward G. Ascione,
Renee A. Chwastek, Edward P. Ascione, and Vida J.
Ascione (Incorporated by reference to the registrant's
Current Report on Form 8-K dated May 15, 1993)
10.23 Agreement and Plan of Reorganization among United Waste
Systems, Inc., United Waste of Northwest Michigan,
Inc., Northern A-1 Sanitation Services, Inc., Edward P.
Ascione, Vida J. Ascione, Michael A. Ascione, Edward G.
Ascione, and Renee A. Chwastek. (Incorporated by
reference to the registrant's Current Report on Form
8-K dated May 15, 1993)
10.24 Merger Agreement dated May 14, 1993, among United Waste
Systems, Inc., Traverse Acquisition, Inc., Glen's
Sanitary Landfill, Inc., G.S. And M.S., Inc., George R.
Slater and Margaret E. Slater. (Incorporated by
reference to the registrant's Current Report on
Form 8-K dated May 14, 1993)
10.25 Merger Agreement dated May 14, 1993, among United Waste
Systems, Inc., Holland Acquisition, Inc., West Michigan
Disposal Company, George R. Slater and Margaret E.
Slater. (Incorporated by reference to the registrant's
Current Report on Form 8-K dated May 14, 1993)
10.26+* Amendment to 1992 Stock Option Plan.
10.27+* Amendment to 1992 Disinterested Director Stock Option
Plan.
10.28 Form of Underwriting Agreement dated July 1995, between
United Waste Systems, Inc., and Goldman, Sachs & Co.
and Prudential Securities Incorporated as
representatives of the several underwriters
(Incorporated by reference to exhibit 1 to the
registrant's Current Report on Form 8-K dated July 5,
1995).
10.29 Underwriting Agreement for common stock offering dated
December 15, 1994. (Incorporated by reference to
Exhibit No. 1.1 to the registrant's Registration
Statement on Form S-3, Commission File No. 33-86380)
10.30+ Amended and Restated Employment Agreement dated June
20, 1995 between United Waste Systems, Inc. and Robert
P. Miner. (Incorporated by reference to Exhibit 10.4
to the registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1995).
10.31 Agreement dated as of September 29, 1995, among United
Waste Systems, Inc., United Waste Systems of
California, Inc. James M. Carroll, Sharon I. Carroll,
Robert J. Carroll, David M. Carroll, Pamela R. Carroll
Sheppard, James M. Sheppard and James M. and Sharon I.
Carroll Revocable Trust and Silver Creek Investments.
(Incorporated by reference to Exhibit 2.1 to the
registrant's Current Report on Form 8-K dated September
29, 1995).
10.32 Stock and Asset Purchase Agreement dated as of
September 19, 1995, among United Waste Systems, Inc.
and Partyka Resource Management Companies, Inc.,
Partyka Resource Management Company, J.F. Partyka &
Son, Inc. Joseph F. Partyka Jr. and Emily L. Partyka.
(Incorporated by reference to Exhibit 2.1 to the
registrant's Current Report on Form 8-K dated September
19, 1995, Items 2 and 7).
10.33 Underwriting Agreement dated as of May 31, 1996 among
the Registrant, Goldman Sachs & Co. and the other
underwriters named herein. (Incorporated by reference
to Exhibit 4.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30 1996).
10.34* Underwriting Agreement dated as of March 3, 1997 among
the Registrant, Goldman, Sachs & Co. and other
underwriters named herein.
11.1* Computation of Earnings Per Share.
12.1* Ratio of Earnings to Fixed Charges
21.1* Subsidiaries of the registrant
23.1* Consent of Ernst & Young LLP
27.1* Financial Data Schedule
99.1* Independent Auditors Report of Hanson Rotter & Green
_______________________________________________
* These exhibits are filed herewith.
+ These exhibits are executive officer or director
compensatory contracts or plans.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the
quarter ended December 31, 1996.
(1) Form 8-K dated September 27, 1996, Item 5
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNITED WASTE SYSTEMS, INC.
Date: March 27, 1997 By: Michael J. Nolan
Michael J. Nolan
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated:
Bradley S. Jacobs
- --------------------
Bradley S. Jacobs
Chairman, Chief Executive Officer and Director (Principal
Executive Officer)
March 27, 1997
John N. Milne
- --------------------
John N. Milne, Director
March 27, 1997
G. Chris Andersen
- --------------------
G. Chris Andersen, Director
March 27,1997
Lawrence J. Twill, Sr.
- --------------------
Lawrence J. Twill, Sr., Director
March 27, 1997
Christian Weyer
- --------------------
Christian Weyer, Director
March 27, 1997
J. Bryan Williams, III
- --------------------
J. Bryan Williams, III, Director
March 27, 1997
Michael J. Nolan
- --------------------
Michael J. Nolan, Chief Financial Officer
(principal financial officer)
March 27, 1997
Sandra E. Welwood
- --------------------
Sandra E. Welwood, Vice President Controller
(principal accounting officer)
March 27, 1997
Exhibit 10.26
Amendment of United Waste Systems, Inc. 1992 Stock Option Plan
(the "Plan")
In order to reflect (i) a 2-for-1 stock split effected in
1996 and (ii) resolutions relating to the Plan duly adopted by
the stockholders of United Waste Systems, Inc. (the "Company") at
the Company's 1996 Annual Meeting of Stockholders, the first
sentence of Section 2 of the Plan is amended to read as follows:
The aggregate number of shares of Common Stock which
may be subject to Options shall not exceed 5,900,000.
Exhibit 10.27
Amendment of United Waste Systems, Inc. 1992 Disinterested
Director Stock Option Plan (the "Plan")
In order to reflect resolutions relating to the Plan duly
adopted by the board of directors of United Waste Systems, Inc.,
the Plan is amended as follows:
1. The first sentence of Section 2 of the Plan is modified
to read as follows:
The aggregate number of shares of Common Stock which
may be subject to Options shall not exceed 368,000.
United Waste Systems, Inc.
Common Stock, par value $.001 per share
Underwriting Agreement
March 3, 1997
To the Representatives of the several
Underwriters named in the respective
Pricing Agreements hereinafter described.
Ladies and Gentlemen:
From time to time United Waste Systems, Inc., a Delaware
corporation (the "Company"), proposes to enter into one or more
Pricing Agreements (each a "Pricing Agreement") in the form of
Annex I hereto, with such additions and deletions as the parties
thereto may determine, and, subject to the terms and conditions
stated herein and therein, to issue and sell to the firms named in
Schedule I to the applicable Pricing Agreement (such firms
constituting the "Underwriters" with respect to such Pricing
Agreement and the securities specified therein) certain shares of
its Common Stock, par value $.001 per share (the "Shares"),
specified in Schedule II to such Pricing Agreement (with respect to
such Pricing Agreement, the "Firm Shares"). If specified in such
Pricing Agreement, the Company may grant to the Underwriters the
right to purchase at their election an additional number of shares,
specified in such Pricing Agreement as provided in Section 3 hereof
(the "Optional Shares"). The Firm Shares and the Optional Shares,
if any, which the Underwriters elect to purchase pursuant to
Section 3 hereof are herein collectively called the "Designated
Shares".
The terms and rights of any particular issuance of Designated
Shares shall be as specified in the Pricing Agreement relating
thereto.
1. Particular sales of Designated Shares may be made from
time to time to the Underwriters of such Shares, for whom the firms
designated as representatives of the Underwriters of such Shares in
the Pricing Agreement relating thereto will act as representatives
(the "Representatives"). The term "Representatives" also refers to
a single firm acting as sole representative of the Underwriters and
to Underwriters who act without any firm being designated as their
representative. This Underwriting Agreement shall not be construed
as an obligation of the Company to sell any of the Shares or as an
obligation of any of the Underwriters to purchase any of the
Shares. The obligation of the Company to issue and sell any of the
Shares and the obligation of any of the Underwriters to purchase
any of the Shares shall be evidenced by the Pricing Agreement with
respect to the Designated Shares specified therein. Each Pricing
Agreement shall specify the aggregate number of the Firm Shares,
the maximum number of Optional Shares, if any, the initial public
offering price of such Firm and Optional Shares or the manner of
determining such price, the purchase price to the Underwriters of
such Designated Shares, the names of the Underwriters of such
Designated Shares, the names of the Representatives of such
Underwriters, the number of such Designated Shares to be purchased
by each Underwriter and the commission, if any, payable to the
Underwriters with respect thereto and shall set forth the date,
time and manner of delivery of such Firm and Optional Shares, if
any, and payment therefor. The Pricing Agreement shall also
specify (to the extent not set forth in the registration statement
and prospectus with respect thereto) the terms of such Designated
Shares. A Pricing Agreement shall be in the form of an executed
writing (which may be in counterparts), and may be evidenced by an
exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of
communications transmitted. The obligations of the Underwriters
under this Agreement and each Pricing Agreement shall be several
and not joint.
2. The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-19029)
(the "Initial Registration Statement") in respect of
the Shares has been filed with the Securities and Exchange
Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in
the form heretofore delivered or to be delivered to the
Representatives and, excluding exhibits to such registration
statement but including all documents incorporated by
reference in the prospectus included therein, to the
Representatives for each of the other Underwriters have been
declared effective by the Commission in such form; other than
a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as
amended (the " Securities Act"), which became effective upon
filing, no other document with respect to the Initial
Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, or document
incorporated by reference therein has heretofore been filed,
or transmitted for filing, with the Commission (other than
prospectuses filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Securities Act, each
in the form heretofore delivered to the Representatives); and
no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated
or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with
the Commission pursuant to Rule 424 under the Securities Act,
is hereinafter called a "Preliminary Prospectus"; the various
parts of the Initial Registration Statement and the Rule
462(b) Registration Statement, if any, including all exhibits
thereto and the documents incorporated by reference in the
prospectus contained in the Initial Registration Statement at
the time such part of the registration statement became
effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, each
as amended at the time such part of the registration statement
became effective, are hereinafter collectively called the
"Registration Statement"; the prospectus relating to the
Shares, in the form in which it has most recently been filed,
or transmitted for filing, with the Commission on or prior to
the date of this Agreement, is hereinafter called the
"Prospectus"; any reference herein to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein
pursuant to the applicable form under the Securities Act, as
of the date of such Preliminary Prospectus or Prospectus, as
the case may be; any reference to any amendment or supplement
to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the
date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and incorporated by reference in such
Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment to the Registration Statement shall
be deemed to refer to and include any annual report of the
Company filed pursuant to Section 13(a) or 15(d) of the
Exchange Act after the initial effective date of the
Registration Statement that is incorporated by reference in
the Registration Statement; and any reference to the
Prospectus as amended or supplemented shall be deemed to refer
to the Prospectus as amended or supplemented in relation to
the applicable Designated Shares in the form in which it is
filed with the Commission pursuant to Rule 424(b) under the
Securities Act in accordance with Section 5(a) hereof,
including any documents incorporated by reference therein as
of the date of such filing);
(b) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
any further documents so filed and incorporated by reference
in the Prospectus or any further amendment or supplement
thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all
material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by an Underwriter of Designated Shares through the
Representatives expressly for use in the Prospectus as amended
or supplemented relating to such Shares;
(c) The Registration Statement and the Prospectus
conform, and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all
material respects to the requirements of the Securities Act
and the rules and regulations of the Commission thereunder and
do not and will not, as of the applicable effective date as to
the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an
Underwriter of Designated Shares through the Representatives
expressly for use in the Prospectus as amended or supplemented
relating to such Shares;
(d) The only subsidiaries (as defined in the rules and
regulations under the Securities Act) of the Company are the
subsidiaries listed on Annex II to this Agreement (the
"subsidiaries") and certain inactive subsidiaries. Except for
(i) any rights the Company may have relating to its former
interest in Ham Sanitary Landfill, Inc. and MAH Equipment
Corporation, (ii) the stock of the subsidiaries, (iii) an
indirect 50% interest in TMM Transfer Stations and Landfills,
L.T.D., an Israeli limited liability company, which itself
holds a 50% interest in an Israeli limited partnership, (iv) a
minority equity interest in VHG, Inc., which has the exclusive
right to collect waste in a town in Minnesota, (v) long-term
debt securities representing obligations not in excess of
$500,000 in the aggregate, acquired by the Company as part of
the assets of acquired businesses, and (vi) as disclosed in
the Prospectus as amended or supplemented, the Company does
not own, and at any Time of Delivery (as defined herein) will
not own, directly or indirectly, any shares of stock or any
other equity or long-term debt securities of any corporation
or have any equity interest in any firm, partnership, joint
venture, association or other entity;
(e) Subsequent to the date of the latest audited
financial statements included or incorporated by reference in
the Prospectus as amended or supplemented, neither the Company
nor any of its subsidiaries has sustained any loss or
interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or
decree, which has had a material and adverse affect on the
Company and its subsidiaries taken as a whole, or the
management, business, properties, business prospects,
condition (financial or other) or results of operations of the
Company and its subsidiaries taken as a whole (a "Material
Adverse Effect"), other than as set forth in or contemplated
by the Prospectus as amended or supplemented. Subsequent to
the respective dates as of which information is given in the
Registration Statement and the Prospectus, as it may be
amended or supplemented, there has not been (i) any
declaration or payment of any dividends or other distributions
with respect to the capital stock of the Company, (ii) any
default in the payment of principal or interest on any
material outstanding indebtedness of the Company or any of its
subsidiaries, (iii) any change in the capital stock of the
Company other than pursuant to the exercise of options or
warrants to acquire Shares outstanding on the date of this
Agreement or the conversion into Shares of convertible debt
outstanding on the date of this Agreement, or in the long-term
debt or obligations under capital leases of the Company or any
of its subsidiaries other than as a result of (A) additional
long-term debt or capital lease obligations assumed by the
Company in connection with acquisitions of businesses,
properties or assets, (B) issuances of Shares expressly
permitted by Section 5(d), (C) repayments of outstanding
indebtedness under the Company's existing $190 million
revolving credit facility with a bank syndicate led by The
First National Bank of Boston and the Bank of America,
Illinois (the "Credit Facility"), (D) net additional
borrowings under the Credit Facility not exceeding $40
million, (E) repayments with respect to such capital leases,
(F) scheduled repayments, when due, of other long-term
indebtedness outstanding as set forth or incorporated in the
Prospectus as amended or supplemented not to exceed $25
million in the aggregate or (G) conversion of convertible debt
outstanding on the date of this Agreement, (iv) except as
contemplated by the Prospectus as amended or supplemented, any
material adverse change, or a development known to the Company
involving a prospective material adverse change, in or
affecting the management, business, prospects, condition
(financial or otherwise), stockholders' equity, or results of
operations of the Company and its subsidiaries, taken as a
whole or (v) any material transaction entered into by the
Company or any of its subsidiaries, other than transactions in
the ordinary course of business and changes and transactions
contemplated by the Prospectus as amended or supplemented. To
the best knowledge of the Company, neither the Company nor any
of its subsidiaries has any contingent obligations which are
required to be disclosed and are not disclosed in the
Prospectus as amended or supplemented which would be
reasonably likely to have a Material Adverse Effect;
(f) The Company and each of its subsidiaries have good
and marketable title to all properties and assets described in
the Prospectus as amended or supplemented as owned by them, in
each case free and clear of all liens, charges, encumbrances
or restrictions, except such liens, charges, encumbrances or
restrictions as are described in the Prospectus as amended or
supplemented or are not material to the business of the
Company and its subsidiaries, taken as a whole, or do not and
would not materially interfere with the use made and proposed
to be made of such property by the Company and its
subsidiaries taken as a whole. Each of the Company and its
subsidiaries has valid, subsisting and enforceable leases for
the properties described in the Prospectus as amended or
supplemented as leased by it, with such exceptions as are not
material to the business of the Company and its subsidiaries,
taken as a whole, or do not and would not materially interfere
with the use made and proposed to be made of such properties
by the Company and such subsidiaries taken as a whole;
(g) The Shares have been duly and validly authorized,
and, when the Firm Shares are issued and delivered pursuant to
this Agreement and the Pricing Agreement with respect to such
Designated Shares and, in the case of any Optional Shares,
pursuant to Over-allotment Options (as defined in Section 3
hereof) with respect to such Shares, such Designated Shares
will be duly and validly issued and fully paid and
non-assessable; the Shares conform to the description thereof
contained in the Registration Statement and the Designated
Shares will conform to the description thereof contained in
the Prospectus as amended or supplemented with respect to such
Designated Shares;
(h) The issue and sale of the Shares in the manner
contemplated in this Agreement and the Prospectus as amended
or supplemented, and the compliance by the Company with all of
the provisions of this Agreement, any Pricing Agreement and
each Over-allotment Option, if any, and the consummation of
the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or
result in the acceleration of any obligation under, any
material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject,
nor will such action require any waiver, consent or approval
under any such agreement or instrument, nor will such action
result in any violation of the provisions of the Certificate
of Incorporation or By-laws of the Company or any statute or
any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated
by this Agreement, any Pricing Agreement or any Over-allotment
Option except for the registration of the Shares under the
Securities Act, the qualification of the Shares for quotation
on the Nasdaq National Market and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the Underwriters;
(i) The statements set forth in the Prospectus as
amended or supplemented under the caption "Description of
Preferred Stock", "Description of Common Stock" and
"Description of Warrants" insofar as they purport to
constitute a summary of the terms of the capital stock of the
Company, and the documents and laws therein described, and
under the caption "Plan of Distribution" and "Underwriting",
insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate in all
material respects and do not omit any material fact;
(j) Other than as set forth or contemplated in the
Prospectus as amended or supplemented or to the extent not
required to be included in or incorporated in the Prospectus
as amended or supplemented: (i) the Company and its
subsidiaries are in compliance with all rules, laws and
regulations relating to the generation, use, discharge,
treatment, storage and disposal of pollutants, hazardous or
toxic substances, land use and protection of health or the
environment ("Environmental Requirements") which are
applicable to their respective businesses, (ii) neither the
Company nor any of its subsidiaries has received any notice
from any governmental authority or third party of an asserted
claim under Environmental Requirements, (iii) no property
which is owned, leased or occupied by the Company or any of
its subsidiaries has been included on a state inventory or
list of contaminated sites which may require investigation
and/or remediation that is similar to the list denominated as
the "National Priority List" maintained by the United States
Environmental Protection Agency pursuant to the Comprehensive
Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Subsection 9601, et seq.). No property which is owned,
leased or occupied by the Company or any of its subsidiaries
has been listed as a Superfund site on such "National Priority
List";
(k) The Company is not, and is not, directly or
indirectly, controlled by, an investment company that is or is
required to be registered under the United States Investment
Company Act of 1940, as amended (the "Investment Company
Act");
(l) None of the holders of outstanding shares of capital
stock of the Company and no other person has or will have any
preemptive or other rights to purchase, subscribe for or
otherwise acquire (i) the Shares or any rights to such Shares
or (ii) as a result of or in connection with the transactions
contemplated by this Agreement, any other capital stock of the
Company or rights thereto; and no holder of securities of the
Company has rights, pursuant to any agreement with the Company
or otherwise, to register such securities under any
registration statement filed with the Commission except as
otherwise disclosed in the Prospectus as amended or
supplemented, except for (A) registration rights provided for
in the Agreement identified as Exhibit 10-12 to the Company's
annual report on Form 10-K for the fiscal year ended December
31, 1995 (the "Form 10-K") and in the registration rights
agreement dated February 13, 1997 with D. Gibbson and B.
Weddle and (B) registration rights, if any, granted by the
Company in connection with any issuance of Shares permitted
pursuant to Section 5(d) (it being understood that the Company
has contractual obligations to maintain the effectiveness of
various effective registration statements that the Company has
heretofore filed pursuant to registration rights agreements
with various holders of its securities);
(m) Each of the directors and executive officers of the
Company has entered into a written agreement with the Company
in the form of Annex III hereto (each such agreement, a
"Lock-up Agreement"), and executed originals of each Lock-up
Agreement have been delivered to you;
(n) The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation.
The Company and each of its subsidiaries has full corporate
power and authority to conduct all the activities conducted by
it, to own or lease all the assets owned or leased by it and
to conduct its business as described in the Prospectus as
amended or supplemented. The Company and each of its
subsidiaries is duly licensed or qualified to do business and
in good standing as a foreign corporation in all jurisdictions
in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such
licensing or qualification necessary, except where the failure
to be so licensed or qualified does not have a Material
Adverse Effect. Complete and correct copies of the certificate
of incorporation and of the by-laws of the Company and each of
its subsidiaries and all amendments thereto have been
delivered to, or have been made available for inspection by,
the Representatives, and (except as contemplated by the
Prospectus as amended or supplemented) no changes in the
certificate of incorporation or by-laws of the Company will be
made subsequent to the date hereof and prior to the earlier of
(i) the expiration of the Underwriters' overallotment option,
or (ii) the Second Time of Delivery (as defined below);
(o) The Company has authorized capital stock as set
forth in or contemplated by the Prospectus as amended or
supplemented. The outstanding Shares have been duly
authorized and validly issued and are fully paid and
nonassessable and have been issued in compliance with all
federal and state securities laws, and were not issued in
violation of or subject to any preemptive or similar right.
The Designated Securities, when issued and delivered pursuant
to this Agreement, will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable
interest and, at each Time of Delivery, will conform to the
description of the Shares contained in the Prospectus as
amended or supplemented. No preemptive right, co-sale right,
registration right, right of first refusal or other similar
right of stockholders (in each case granted or agreed to by
the Company or by which the Company is or may be bound),
exists or will exist at any Time of Delivery with respect to
any of the Shares, other than (A) registration rights provided
for in the Agreement identified as Exhibit 10-12 to the Form
10-K and in the registration rights agreement dated February
13, 1997 with D. Gibbson and B. Weddle and (B) registration
rights, if any, granted by the Company in connection with any
issuance of Shares permitted pursuant to Section 5(d) hereof
(it being understood that the Company has contractual
obligations to maintain the effectiveness of various effective
registration statements that the Company has heretofore filed
pursuant to registration rights agreements with various
holders of its securities). All issued and outstanding shares
of capital stock of each subsidiary of the Company have been
duly authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of or subject
to any preemptive right or other rights to subscribe for or
purchase shares and, except as disclosed in the Prospectus as
amended or supplemented, are owned of record and beneficially
by the Company free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. The
description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the
Form 10-K accurately and fairly presents the information
required to be shown with respect to such plans, arrangements,
options and rights. The description of the capital stock of
the Company in the Prospectus as amended or supplemented is,
and at each Time of Delivery will be, complete and accurate in
all respects. Except as set forth in the Prospectus as
amended or supplemented, except for options issued in the
ordinary course after the date hereof under the Company's
existing stock option plans and except as otherwise permitted
by Section 5(d), the Company does not have outstanding, and at
each Time of Delivery will not have outstanding, any options
to purchase, or any rights or warrants to subscribe for, or
any securities or obligations convertible into, or any
contracts or commitments to issue or sell, any Shares, any
shares of capital stock of any subsidiary or any such
warrants, convertible securities or obligations;
(p) The historical financial statements, selected
financial information and related notes and schedules of the
Company in the Prospectus as amended or supplemented present
fairly the consolidated financial condition of the Company and
its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows of the
Company and its subsidiaries for the respective periods
covered thereby, all in conformity with generally accepted
accounting principles applied on a consistent basis throughout
the periods involved, except as otherwise disclosed in the
Prospectus as amended or supplemented. All historical
financial statements and schedules of the Company required to
be included in the Form 10-K under the Exchange Act or the
rules and regulations thereunder are included therein. Ernst
& Young (the "Accountants"), who have reported on the
historical financial statements and schedules, are independent
accountants with respect to the Company as required by the
Exchange Act and the rules and regulations thereunder. No
financial statements or schedules of any of the Company's
subsidiaries are required to be included or incorporated by
reference in the Form 10-K. The condensed pro forma financial
statements and related notes and schedules included or
incorporated by reference in the Prospectus as amended or
supplemented have been properly compiled in all material
respects on the basis of the transactions and assumptions
discussed therein, the pro forma adjustments to the historical
figures have been properly applied to such figures and such
pro forma presentations comply with the applicable accounting
requirements of the Commission (it being understood that such
pro forma financial statements have been prepared on an
aggregate basis);
(q) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with
management's general or specific authorization;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences;
(r) Except as set forth in the Prospectus as amended or
supplemented, there are no actions, suits or proceedings
pending or, to the best knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries or
any of their respective officers in their capacity as such or
of which any property of the Company or any of its
subsidiaries is the subject, before or by any court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable
ruling, decision or finding would have a Material Adverse
Effect;
(s) Except as set forth in the Prospectus as amended or
supplemented, the Company and each of its subsidiaries has (i)
all governmental licenses, franchises, permits, consents,
orders, approvals and other authorizations (collectively,
"permits") required in connection with its business as
contemplated in the Prospectus as amended or supplemented
(except where the failure to have any such permit would not be
reasonably likely to have a Material Adverse Effect),
(ii) fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which
allows, or after notice or lapse of time would allow,
revocation or termination thereof or would result in any other
material impairment of the rights of the holder of any such
permit, except where any such revocation or termination would
not be reasonably likely to have a Material Adverse Effect,
(iii) complied with all laws, regulations and orders
applicable to it or its business, except where such
noncompliance would not be reasonably likely to have a
Material Adverse Effect, and (iv) performed all its material
obligations required to be performed by it, and is not, and at
any Time of Delivery will not be, in default in any material
respect, under any indenture, mortgage, deed of trust, voting
trust agreement, loan agreement, bond, debenture, note
agreement, lease, contract or other agreement or instrument
(collectively, a "contract or other agreement") to which it is
a party or by which its property is bound or affected except
for defaults that would not be reasonably likely to have a
Material Adverse Effect, would not affect the validity of the
Shares or affect the transactions contemplated by this
Agreement. Except as set forth in the Prospectus as amended
or supplemented, to the best knowledge of the Company, no
other party under any contract or other agreement to which the
Company or any of its subsidiaries is a party is in default in
any respect thereunder, except for defaults that would not be
reasonably likely to have a Material Adverse Effect. Neither
the Company nor any of its subsidiaries is in violation of any
provision of its certificate of incorporation or by-laws;
(t) Each contract of the Company or any of its
subsidiaries that is an exhibit to the Form 10-K has been duly
authorized, executed and delivered by the Company or such
subsidiary and constitutes a valid and binding agreement of
the Company or such subsidiary and is enforceable against the
Company or such subsidiary in accordance with the terms
thereof;
(u) No statement, representation, warranty or covenant
made by the Company in this Agreement or made in any
certificate or document required by this Agreement to be
delivered to the Underwriters was or will be, when made,
inaccurate, untrue or incorrect in any material respect;
(v) Neither the Company nor any of its directors,
officers or, to the best knowledge of the Company, controlling
persons has taken, directly or indirectly, any action
intended, or which might reasonably be expected, to cause or
result, under the Exchange Act or otherwise, in, or which has
constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of
the Shares;
(w) Neither the Company nor any of its subsidiaries is
involved in any material labor dispute nor, to the knowledge
of the Company, is any such dispute threatened;
(x) The Company and its subsidiaries own, or are
licensed or otherwise have the full right to use, all material
trademarks and trade names which are used in or necessary for
the conduct of the businesses of the Company and its
subsidiaries, taken as a whole, as described in the Prospectus
as amended or supplemented. The Company has not received any
notice of, and does not otherwise have knowledge of, any
claims that have been asserted by any person to the use of any
such trademarks or trade names or challenging or questioning
the validity or effectiveness of any such trademark or trade
name. The use, in connection with the business and operations
of the Company and its subsidiaries of such trademarks and
trade names does not, to the Company's knowledge, infringe on
the rights of any person;
(y) Neither the Company nor any of its subsidiaries nor,
to the best knowledge of the Company, any employee or agent of
the Company or any subsidiary has made any payment of funds of
the Company or any subsidiary or received or retained any
funds in violation of any law, rule or regulation or of a
character required to be disclosed in the Form 10-K and not so
disclosed;
(z) The Company and each of its subsidiaries has
completed in accordance with applicable laws and tax
accounting rules consistently applied and has filed all
necessary federal, state and foreign income and franchise tax
returns (subject to any applicable extensions for filing
thereof) and has paid all taxes and assessments shown as due
thereon; and the Company has no knowledge of any tax
deficiency which has been asserted or threatened against the
Company or any of its subsidiaries which could have a Material
Adverse Effect. All tax liabilities are adequately provided
for on the books of the Company and its subsidiaries in
accordance with generally accepted accounting principles;
(aa) The accounts receivable of the Company and each of
its subsidiaries at December 31, 1996 arose in the ordinary
course of business and represented bona fide claims against
debtors for goods or services sold or provided to such debtors
in accordance with valid purchase orders or instructions, and
the Company knows of no reasonable basis on which any material
amount of such accounts receivable could be disavowed by the
debtors;
(bb) Neither the Company nor any of its subsidiaries,
since acquired by the Company, or, to the best knowledge of
the Company, any subsidiary prior to being acquired by the
Company, has directly or indirectly, at any time during the
past five years (i) made any unlawful contribution to any
candidate for political office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment
to any federal, state or foreign governmental official, or
other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws
of the United States or any jurisdiction thereof or applicable
foreign jurisdictions;
(cc) All documents delivered or to be delivered by the
Company or any of its directors, officers or controlling
persons with respect to the offering contemplated by the
Prospectus as amended or supplemented to the Underwriters or
any state securities law administrator in connection with the
issuance and sale of the Shares were on the dates on which
they were delivered or will be on the dates on which they are
delivered, true, complete and correct in all material respects
(except to the extent that incorrect information was
subsequently corrected prior to the date hereof);
(dd) Any certificate signed by any officer of the
Company and delivered to the Representatives or to counsel for
the Underwriters shall be deemed a representation and warranty
of the Company to the Underwriters as to the matters covered
thereby. Any certificate delivered by the Company to its
counsel for purposes of enabling such counsel to render the
opinions referred to in Section 7 will also be furnished to
the Representatives and counsel for the Underwriters and shall
be deemed to be additional representations and warranties of
the Company to the Underwriters as to the matters covered
thereby;
(ee) The Company believes that, except as otherwise
disclosed in the Prospectus as amended or supplemented, the
Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses
in which they are engaged; and the Company does not have any
reason to believe that it and its subsidiaries will not be
able to renew existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue their respective
businesses at a cost that would not have a Material Adverse
Effect, except that no representation and warranty is made
pursuant to this Section 2(ee) with respect to environmental
liability insurance;
(ff) There is no information relating to future capital
expenditures that the Company or any of its subsidiaries will
be required to make with respect to their respective existing
operations in order to comply with Environmental Requirements
which is required to be described in the Prospectus as amended
or supplemented and is not so described;
(gg) There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course
of business) or guarantees of indebtedness by the Company to
or for the benefit of any of the officers or directors of the
Company or any of the members of the families of any of them
required to be disclosed in the Prospectus as amended or
supplemented which are not so disclosed;
3. Upon the execution of the Pricing Agreement applicable to
any Designated Shares and authorization by the Representatives of
the release of the Firm Shares, the several Underwriters propose to
offer the Firm Shares for sale upon the terms and conditions set
forth in the Prospectus as amended or supplemented.
The Company may specify in the Pricing Agreement applicable to
any Designated Shares that the Company thereby grants to the
Underwriters the right (an "Overallotment Option") to purchase at
their election up to the number of Optional Shares set forth in
such Pricing Agreement, on the terms set forth in the paragraph
above, for the sole purpose of covering over-allotments in the sale
of the Firm Shares. Any such election to purchase Optional Shares
may be exercised by written notice from the Representatives to the
Company, given within a period specified in the Pricing Agreement,
setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be
delivered, as determined by the Representatives but in no event
earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless the Representatives and the Company otherwise
agree in writing, earlier than or later than the respective number
of business days after the date of such notice set forth in such
Pricing Agreement.
The number of Optional Shares to be added to the number of
Firm Shares to be purchased by each Underwriter as set forth in
Schedule I to the Pricing Agreement applicable to such Designated
Shares shall be, in each case, the number of Optional Shares which
the Company has been advised by the Representatives have been
attributed to such Underwriter; provided that, if the Company has
not been so advised, the number of Optional Shares to be so added
shall be, in each case, that proportion of Optional Shares which
the number of Firm Shares to be purchased by such Underwriter under
such Pricing Agreement bears to the aggregate number of Firm Shares
(rounded as the Representatives may determine to the nearest 100
shares). The total number of Designated Shares to be purchased by
all the Underwriters pursuant to such Pricing Agreement shall be
the aggregate number of Firm Shares set forth in Schedule I to such
Pricing Agreement plus the aggregate number of Optional Shares
which the Underwriters elect to purchase.
4. Certificates for the Firm Shares and the Optional Shares
to be purchased by each Underwriter pursuant to the Pricing
Agreement relating thereto, in the form specified in such Pricing
Agreement and in such authorized denominations and registered in
such names as the Representatives may request upon at least
forty-eight hours' prior notice to the Company, shall be delivered
by or on behalf of the Company to the Representatives for the
account of such Underwriter, against payment by such Underwriter or
on its behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Company
in the funds specified in such Pricing Agreement, (i) with respect
to the Firm Shares, all in the manner and at the place and time and
date specified in such Pricing Agreement or at such other place and
time and date as the Representatives and the Company may agree upon
in writing, such time and date being herein called the "First Time
of Delivery" and (ii) with respect to the Optional Shares, if any,
in the manner and at the time and date specified by the
Representatives in the written notice given by the Representatives
of the Underwriters' election to purchase such Optional Shares, or
at such other time and date as the Representatives and the Company
may agree upon in writing, such time and date, if not the First
Time of Delivery, herein called the "Second Time of Delivery".
Each such time and date for delivery is herein called a "Time of
Delivery".
5. The Company agrees with each of the Underwriters of any
Designated Shares:
(a) To prepare the Prospectus as amended and
supplemented in relation to the applicable Designated Shares
in a form approved by the Representatives and to file such
Prospectus pursuant to Rule 424(b) under the Securities Act
not later than the Commission's close of business on the
second business day following the execution and delivery of
the Pricing Agreement relating to the applicable Designated
Shares or, if applicable, such earlier time as may be required
by Rule 424(b); to make no further amendment or any supplement
to the Registration Statement or Prospectus as amended or
supplemented after the date of the Pricing Agreement relating
to such Shares and prior to any Time of Delivery for such
Shares which shall be reasonably disapproved by the
Representatives for such Shares promptly after reasonable
notice thereof (provided that the foregoing shall not apply to
the filing of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 after the First Time of
Delivery) ; to advise the Representatives promptly of any such
amendment or supplement after any Time of Delivery for such
Shares and furnish the Representatives with copies thereof; to
file promptly all reports and any definitive proxy or
information statements required to be filed by the Company
with the Commission pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act for so long as the delivery of a
prospectus is required in connection with the offering or sale
of such Shares, and during such same period to advise the
Representatives, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has
been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the
Commission, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
prospectus relating to the Shares, of the suspension of the
qualification of such Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any such
stop order or of any such order preventing or suspending the
use of any prospectus relating to the Shares or suspending any
such qualification, promptly to use its best efforts to obtain
the withdrawal of such order;
(b) Prior to 10:00 a.m., New York City time, on the New
York Business Day next succeeding the date of the Pricing
Agreement, to furnish the Underwriters with copies of the
Prospectus as amended or supplemented in New York City in such
quantities as the Representatives may from time to time
reasonably request, and, if the delivery of a prospectus is
required at any time in connection with the offering or sale
of the Shares and if at such time any event shall have
occurred as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or
supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in
order to comply with the Securities Act or the Exchange Act,
to notify the Representatives and upon their request to file
such document and to prepare and furnish without charge to
each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably
request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or
effect such compliance;
(c) To make generally available to its security holders
as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration
Statement (as defined in Rule 158(c) under the Securities
Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(d) (i) During the period beginning from the date of the
Pricing Agreement for such Designated Shares and continuing to
and including the date 90 days after the date of such Pricing
Agreement, not to offer, sell, contract to sell or otherwise
dispose of, or file a registration statement (except for a
registration statement relating to the securities permitted to
be issued pursuant to clauses (x), (y) or (z) below) with
respect to, any Shares, any securities of the Company
substantially similar to the Shares or any securities of the
Company convertible into or exchangeable or exercisable for
Shares or any such substantially similar securities (any such
securities, a "Covered Security"), other than (x) pursuant to
employee stock option plans existing as of the date hereof (as
such plans may hereafter be amended with shareholder approval)
or in connection with other employee incentive compensation
arrangements consistent with past practice, or upon the
exercise of options heretofore or hereafter granted pursuant
to such plans or arrangements, (y) upon the conversion of
convertible securities or exercise of warrants or options, in
each case as outstanding on the date hereof, or (z) Shares or
Covered Securities issued as consideration for acquisitions of
businesses, properties or assets; and (ii) that it will use
reasonable efforts to cause each person who has entered into
a Lock-up Agreement to comply therewith, will not grant any
waivers or consents to non-compliance therewith and will
enforce its rights under each such agreement, in each case
unless and to the extent that it shall have obtained the prior
written consent of Goldman, Sachs & Co.; and
(e) During a period of five years from the date of the
Prospectus, as amended or supplemented with respect to the
Designated Shares, to furnish to you, upon request, copies of
all reports mailed to stockholders, together with the exhibits
thereto, and copies of any reports filed with the Commission
or any national securities exchange on which any class of
securities of the Company is listed, together with the
exhibits thereto.
(f) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with
the Commission in compliance with Rule 462(b) by 10:00 P.M.,
Washington, D.C. time, on the date of the Pricing Agreement,
and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of
such fee pursuant to Rule 111(b) under the Securities Act.
6. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the
registration of the Shares under the Securities Act and all other
expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers;
(ii) the cost of printing or producing (not including fees of
counsel to the Underwriters) any Agreement among Underwriters, this
Agreement, any Pricing Agreement, any Blue Sky Memorandum, closing
documents (including compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the
Shares; (iii) the cost of preparing certificates for the Shares;
(iv) the cost and charges of any transfer agent or registrar or
dividend disbursing agent; and (v) all other costs and expenses
incident to the performance of its obligations hereunder and under
any Over-allotment Options which are not otherwise specifically
provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof,
the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, transfer taxes on resale of
any of the Shares by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters of any Designated
Shares under the Pricing Agreement relating to such Designated
Shares shall be subject, in the discretion of the Representatives,
to the condition that all representations and warranties and other
statements of the Company in or incorporated by reference in the
Pricing Agreement relating to such Designated Shares are, at and as
of each Time of Delivery for such Designated Shares, true and
correct, the condition that the Company shall have performed all of
its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus as amended or supplemented in
relation to such Designated Shares shall have been filed with
the Commission pursuant to Rule 424(b) within the applicable
time period prescribed for such filing by the rules and
regulations under the Securities Act and in accordance with
Section 5(a) hereof; if the Company has elected to rely upon
Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the
date of the Pricing Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the
part of the Commission shall have been complied with to the
Representatives' reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters
shall have furnished to the Representatives such opinion or
opinions, dated each Time of Delivery for such Designated
Shares, with respect to the incorporation of the Company, the
Designated Shares, this Agreement and the Pricing Agreement
and the Prospectus as amended or supplemented as well as such
other related matters as the Representatives may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to
pass upon such matters;
(c) Ehrenreich & Krause, counsel for the Company, shall
have furnished to you their written opinion or opinions, dated
such Time of Delivery, in form and substance satisfactory to
you, to the effect set forth in Annex V;
(d) Proskauer Rose Goetz & Mendelsohn LLP, special
environmental counsel to the Company, shall have furnished to
you their written opinion, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect set
forth in Annex VI;
(e) On the date of the Pricing Agreement for such
Designated Shares and at each Time of Delivery for such
Designated Shares, the independent accountants of the Company
who have certified the financial statements of the Company and
its subsidiaries included or incorporated by reference in the
Registration Statement shall have furnished to the
Representatives a letter, dated the effective date of the
Registration Statement or the date of the most recent report
filed with the Commission containing financial statements and
incorporated by reference in the Registration Statement, if
the date of such report is later than such effective date, and
a letter dated such Time of Delivery, respectively, to the
effect set forth in Annex V hereto, and with respect to such
letter dated such Time of Delivery, as to such other matters
as the Representatives may reasonably request and in form and
substance satisfactory to the Representatives;
(f) Since the respective dates as of which information
is given in the Prospectus as amended or supplemented,
(i) there shall not have been an adverse change in the general
affairs, business, business prospects, properties, management,
condition (financial or otherwise) or results of operations of
the Company and its subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of
business, in each case other than as set forth in or
contemplated by the Prospectus as amended or supplemented,
(ii) there shall not have been any change in the capital stock
of the Company other than pursuant to the exercise of options
or warrants to acquire Shares outstanding on the date of this
Agreement or the conversion into Shares of convertible debt
outstanding on the date of this Agreement or in the long-term
debt, or obligations under capital leases, of the Company or
any of its subsidiaries other than as a result of (A)
additional long-term debt or capital lease obligations assumed
by the Company in connection with acquisitions of businesses,
properties or assets, (B) issuances of Shares expressly
permitted by Section 5(d) hereof, (C) repayments of
outstanding indebtedness under the Credit Facility, (D)
additional net borrowings under the Credit Facility not
exceeding $40 million, (E) repayments with respect to such
capital leases, (F) scheduled repayments, when due, of other
long-term indebtedness outstanding as set forth in the
Prospectus as amended or supplemented, not to exceed
$25 million in the aggregate, or (G) conversion of convertible
debt outstanding on the date of this Agreement, and (iii)
neither the Company nor any of its subsidiaries shall have
sustained any loss or interference with its business or
properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action,
order or decree, which is not set forth in the Prospectus as
amended or supplemented, if in the judgment of the
Representatives any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Shares
by the Underwriters on the terms and in the manner
contemplated by the Prospectus as amended or supplemented;
(g) Since the respective dates as of which information
is given in the Prospectus as amended or supplemented there
shall have been no litigation or other proceeding instituted
against the Company or any of its subsidiaries or any of their
respective officers or directors in their capacities as such,
before or by any court, commission, regulatory body,
administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding would have a Material Adverse
Effect;
(h) On or after the date of the Pricing Agreement
relating to the Designated Shares, (i) no downgrading shall
have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating
organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act and
(ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt
securities;
(i) On or after the date of the Pricing Agreement
relating to the Designated Shares, there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York
Stock Exchange or on the Nasdaq National Market; (ii) a
suspension or material limitation in trading in the Company's
securities on the Nasdaq National Market; (iii) a general
moratorium on commercial banking activities in New York
declared by either Federal or New York State authorities;
(iv) the outbreak or the escalation of hostilities involving
the United States or the declaration by the United States, on
or after the date hereof, of a national emergency or war; or
(v) the occurrence of any change in national or international
financial, political or economic conditions or currency
exchange rates or controls, if the effect of any event
specified in clause (iv) or (v) above, in the judgment of the
Representatives, makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Shares being
issued at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus as amended or supplemented;
(j) There shall have occurred no breach of any Lock-up
Agreement;
(k) The Shares at each Time of Delivery shall have been
duly listed for quotation on the Nasdaq National Market;
(l) The Company shall have complied with the provisions
of Section 5(b) hereof with respect to the furnishing of
prospectuses on the New York Business Day next succeeding the
date of the Pricing Agreement; and
(m) The Company shall have furnished or caused to be
furnished to the Representatives at each Time of Delivery for
the Designated Shares certificates of officers of the Company
satisfactory to the Representatives as to the accuracy of the
representations and warranties of the Company herein at and as
of such Time of Delivery, as to the performance by the Company
of all of its obligations hereunder to be performed at or
prior to such Time of Delivery, as to the matters set forth in
subsections (a), (f) and (g) of this Section and as to such
other matters as the Representatives may reasonably request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other
prospectus relating to the Shares, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus
as amended or supplemented and any other prospectus relating to the
Shares, or any such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by
any Underwriter of Designated Shares through the Representatives
expressly for use in the Prospectus as amended or supplemented
relating to such Shares.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as amended
or supplemented and any other prospectus relating to the Shares, or
any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any
Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or supplemented
and any other prospectus relating to the Shares, or any such
amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by such Underwriter
through the Representatives expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof
is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any
indemnified party otherwise than under such subsection. In case
any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein
and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any
legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending
or threatened action or claim in respect of which indemnification
or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or
claim) unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not
include any statement as to or an admission of fault, culpability
or a failure to act, by or on behalf of any indemnified party. An
indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent
shall not be unreasonably withheld).
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and
the Underwriters of the Designated Shares on the other from the
offering of the Designated Shares to which such loss, claim, damage
or liability (or action in respect thereof) relates. If, however,
the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault
of the Company on the one hand and the Underwriters of the
Designated Shares on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received
by the Company on the one hand and such Underwriters on the other
shall be deemed to be in the same proportion as the total net
proceeds from such offering (before deducting expenses) received by
the Company bear to the total underwriting discounts and
commissions received by such Underwriters. The relative fault
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or such
Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to
above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in
this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the applicable
Designated Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Underwriters
of Designated Shares in this subsection (d) to contribute are
several in proportion to their respective underwriting obligations
with respect to such Shares and not joint.
(e) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise
have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of
the Securities Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon
the same terms and conditions, to each officer and director of the
Company and to each person, if any, who controls the Company within
the meaning of the Securities Act.
9. (a) If any Underwriter shall default in its obligation
to purchase the Firm Shares or Optional Shares which it has agreed
to purchase under the Pricing Agreement relating to such Shares,
the Representatives may in their discretion arrange for themselves
or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six hours after such
default by any Underwriter the Representatives do not arrange for
the purchase of such Firm Shares or Optional Shares, as the case
may be, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other
parties satisfactory to the Representatives to purchase such Shares
on such terms. In the event that, within the respective prescribed
period, the Representatives notify the Company that they have so
arranged for the purchase of such Shares, or the Company notifies
the Representatives that it has so arranged for the purchase of
such Shares, the Representatives or the Company shall have the
right to postpone a Time of Delivery for such Shares for a period
of not more than seven days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the
Prospectus as amended or supplemented, or in any other documents or
arrangements, and the Company agrees to file promptly any
amendments or supplements to the Registration Statement or the
Prospectus which in the reasonable opinion of the Representatives
may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this
Section with like effect as if such person had originally been a
party to the Pricing Agreement with respect to such Designated
Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Firm Shares or Optional Shares, as the case may be,
of a defaulting Underwriter or Underwriters by the Representatives
and the Company as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of the Firm Shares or Optional
Shares, as the case may be, to be purchased at the respective Time
of Delivery, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of Firm Shares or
Optional Shares, as the case may be, which such Underwriter agreed
to purchase under the Pricing Agreement relating to such Designated
Shares and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the number of Firm Shares
or Optional Shares, as the case may be, which such Underwriter
agreed to purchase under such Pricing Agreement) of the Firm Shares
or Optional Shares, as the case may be, of such defaulting
Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Firm Shares or Optional Shares, as the case may be,
of a defaulting Underwriter or Underwriters by the Representatives
and the Company as provided in subsection (a) above, the aggregate
number of Firm Shares or Optional Shares, as the case may be, which
remains unpurchased exceeds one-eleventh of the aggregate number of
the Firm Shares or Optional Shares, as the case may be, to be
purchased at the respective Time of Delivery, as referred to in
subsection (b) above, or if the Company shall not exercise the
right described in subsection (b) above to require non-defaulting
Underwriters to purchase Firm Shares or Optional Shares, as the
case may be, of a defaulting Underwriter or Underwriters, then the
Pricing Agreement relating to such Firm Shares or the
Over-allotment Option relating to such Optional Shares, as the case
may be, shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several
Underwriters, as set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation
(or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or
the Company, or any officer or director or controlling person of
the Company, and shall survive delivery of and payment for the
Shares.
11. If any Pricing Agreement or Over-allotment Option shall
be terminated pursuant to Section 9 hereof, the Company shall not
then be under any liability to any Underwriter with respect to the
Firm Shares or Optional Shares with respect to which such Pricing
Agreement shall have been terminated except as provided in Sections
6 and 8 hereof; but, if any Pricing Agreement or Over-allotment
Option shall be terminated by the Company pursuant to any other
provision hereof or if the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability of the
Company to perform its obligations hereunder, the Company will
reimburse the Underwriters through the Representatives for all
out-of-pocket expenses approved in writing by the Representatives,
including fees and disbursements of counsel, reasonably incurred by
the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Shares, but the Company shall then be
under no further liability to any Underwriter with respect to such
Designated Shares except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the
Underwriters of Designated Shares shall act on behalf of each of
such Underwriters, and the parties hereto shall be entitled to act
and rely upon any statement, request, notice or agreement on behalf
of any Underwriter made or given by such Representatives jointly or
by such of the Representatives, if any, as may be designated for
such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder
shall be in writing, and if to the Underwriters shall be delivered
or sent by mail, telex or facsimile transmission to the address of
the Representatives as set forth in the Pricing Agreement; and if
to the Company shall be delivered or sent by mail, telex or
facsimile transmission to United Waste Systems, Inc., Four
Greenwich Office Park, Greenwich, Connecticut 06830, Attention:
Bradley S. Jacobs, facsimile transmission no. (203) 622-6080, with
copies to Oscar Folger, Esq., 521 Fifth Avenue, 24th Floor, New
York, New York 10175, facsimile transmission no. (212) 697-9570,
and Ehrenreich & Krause, 1140 Avenue of the Americas, New York, New
York 10036, Attention: Joseph Ehrenreich, Esq., facsimile
transmission no. (212) 302-6154; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by the Representatives upon
request. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall be
binding upon, and inure solely to the benefit of, the Underwriters,
the Company and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Company and each person
who controls the Company or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of
this Agreement or any such Pricing Agreement. No purchaser of any
of the Shares from any Underwriter shall be deemed a successor or
assign by reason merely of such purchase.
14. Time shall be of the essence of each Pricing Agreement.
As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
15. This Agreement and each Pricing Agreement shall be
governed by and construed in accordance with the laws of the State
of New York.
16. This Agreement and each Pricing Agreement may be executed
by any one or more of the parties hereto and thereto in any number
of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one
and the same instrument.
Very truly yours,
United Waste Systems,
Inc.
By: /s/ Michael J. Nolan
Name: Michael J. Nolan
Title: Chief Financial
Officer
<PAGE>
ANNEX I
Pricing Agreement
[Name and Address of the Underwriters]
, 19..
Ladies and Gentlemen:
United Waste Systems, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated
herein and in the Underwriting Agreement, dated March 3, 1997 (the
"Underwriting Agreement"), to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") the Shares
specified in Schedule II hereto (the "Designated Shares" consisting
of Firm Shares and any Optional Shares the Underwriters may elect
to purchase). Each of the provisions of the Underwriting Agreement
is incorporated herein by reference in its entirety, and shall be
deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the
representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Pricing Agreement,
except that each representation and warranty which refers to the
Prospectus in Section 2 of the Underwriting Agreement shall be
deemed to be a representation or warranty as of the date of the
Underwriting Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the date of
this Pricing Agreement in relation to the Prospectus as amended or
supplemented relating to the Designated Shares which are the
subject of this Pricing Agreement. Each reference to the
Representatives herein and in the provisions of the Underwriting
Agreement so incorporated by reference shall be deemed to refer to
you. Unless otherwise defined herein, terms defined in the
Underwriting Agreement are used herein as therein defined. The
Representatives designated to act on behalf of the Representatives
and on behalf of each of the Underwriters of the Designated Shares
pursuant to Section 12 of the Underwriting Agreement and the
address of the Representatives referred to in such Section 12 are
set forth in Schedule II hereto.
An amendment to the Registration Statement, or a supplement to
the Prospectus, as the case may be, relating to the Designated
Shares, in the form heretofore delivered to you is now proposed to
be filed with the Commission.
Subject to the terms and conditions set forth herein and in
the Underwriting Agreement incorporated herein by reference, (a)
the Company agrees to issue and sell to each of the Underwriters,
and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the time and place and at the
purchase price to the Underwriters set forth in Schedule II hereto,
the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto and (b) in the event and to the
extent that the Underwriters shall exercise the election to
purchase Optional Shares, as provided below, the Company agrees to
issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from
the Company at the purchase price to the Underwriters set forth in
Schedule II hereto that portion of the number of Optional Shares as
to which such election shall have been exercised.
The Company hereby grants to each of the Underwriters the
right to purchase at their election up to the number of Optional
Shares set forth opposite the name of such Underwriter in Schedule
I hereto on the terms referred to in the paragraph above for the
sole purpose of covering over-allotments in the sale of the Firm
Shares. Any such election to purchase Optional Shares may be
exercised by written notice from the Representatives to the Company
given within a period of 30 calendar days after the date of this
Pricing Agreement, setting forth the aggregate number of Optional
Shares to be purchased and the date on which such Optional Shares
are to be delivered, as determined by the Representatives, but in
no event earlier than the First Time of Delivery or, unless the
Representatives and the Company otherwise agree in writing, no
earlier than one or later than ten business days after the date of
such notice.<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return to us [one for the Company and one for each
of the Representatives plus one for each counsel] counterparts
hereof, and upon acceptance hereof by you, on behalf of each of the
Underwriters, this letter and such acceptance hereof, including the
provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the
Underwriters and the Company. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is
or will be pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted
to the Company for examination, upon request, but without warranty
on the part of the Representatives as to the authority of the
signers thereof.
Very truly yours,
United Waste Systems, Inc.
By:
Name:
Title:
Accepted as of the date hereof:
[Names of Representatives]
By: . . . . . . . . . . . . . . .
Name:
Title:
On behalf of each of the Underwriters<PAGE>
SCHEDULE I
Maximum Number
of Optional
Number of Shares Which
Firm Shares May be
Underwriter to be Purchased Purchased
[Names of Representatives]
[Names of other Underwriters]
Total <PAGE>
SCHEDULE II
Title of Designated Shares:
Number of Designated Shares:
Number of Firm Shares:
Maximum Number of Optional Shares:
Initial Offering Price to Public:
[$........ per Share] [Formula]
Purchase Price by Underwriters:
[$........ per Share] [Formula]
[Commission Payable to Underwriters:
$........ per Share in [specify same form of funds as in Specified
Funds below]]
Form of Designated Shares:
Definitive form, to be made available for checking [and packaging]
at least twenty-four hours prior to the Time of Delivery at the
office of [The Depository Trust Company or its designated
custodian] [the Representatives]
Specified Funds for Payment of Purchase Price:
Wire transfer of same day funds
Time of Delivery:
......... a.m. (New York City time), .................., 19..
Closing Location:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Names and Addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
[Other Terms] :
<PAGE>
ANNEX II
Subsidiaries
Those corporations which are indented represent subsidiaries
of the corporation under which they are indented.
Names State of Incorporation
Able Sanitation, Inc. Michigan
United Waste Sytems of
Central Michigan, Inc. Michigan
A-1 Transfer, Incorporated Colorado
Estes Park Investments, Inc. Colorado
M & S Investments, Inc. Colorado
Anderson-Cottonwood Disposal
Services, Inc. California
C & L Disposal Co., Inc. California
Colusa Solid Waste & Recycling, Inc. California
Corning Disposal Service, Inc. California
Nevada City Garbage Service, Inc. California
Clayton-Ward Company, Inc. California
Great Northern Sanitary, Inc. California
S & L Total Waste Systems, Inc. Nevada
Benson Brothers Disposal, Inc. New York
Cannel Marina Corporation California
Neal Road Landfill Corporation California
Jolon Road Landfill Corporation California
Cal Sanitation Services, Inc. California
Portable Site Services, Inc. California
CDF Consolidated Corporation Illinois
Central Sanitary Landfill, Inc. Michigan
Cheshire Sanitation, Inc. New Hampshire
Colorado Waste Services, Inc. Colorado
Commercial Disposal Co., Inc. Massachusetts
Connecticut Valley Sanitary Waste
Disposal, Inc. Massachusetts
DSI of Shawano County, Inc. Wisconsin
Dafter Sanitary Landfill, Inc. Michigan
Dakota Resource Recovery, Inc. Minnesota
Dietrich Sanitary Service, Inc. North Dakota
Laurel Ridge Landfill, Inc. Kentucky
G&W Disposal, Inc. Kentucky
G&W Recycling, Inc. Kentucky
Glen's Sanitary Landfill, Inc. Michigan
HCS Sanitation, Inc. North Dakota
Harland's Sanitary Landfill, Inc. Michigan
Holyoke Sanitary Landfill, Inc. Massachusetts
Jahner Sanitation, Inc. North Dakota
Jones Sanitation, Inc. Kentucky
K and W Landfill, Inc. Michigan
Kelly Run Sanitation, Inc. Pennsylvania
Ken's Pickup Service, Inc. Michigan
Knutson Services, Inc. Minnesota
Knutson Material Recovery
Facility, Inc. Minnesota
Landfill Systems, Inc. New Mexico
Landfill Hauling Systems, Inc. New Mexico
McDaniel Landfill, Inc. North Dakota
Midwest Sanitation Service, Inc. North Dakota
Northern A-1 Sanitation Services, Inc. Michigan
Omega One Waste, Inc. Arizona
PRTR, Inc. Massachusetts
Pando Disposal Services Corporation Colorado
Pak'M Roll-Off Services, Inc. Colorado
Peninsula Sanitation, Inc. Michigan
RCI Clinton, Inc. Massachusetts
RCI Hudson, Inc. Massachusetts
Re-Cy-Co, Inc. Minnesota
Resource Control Composting, Inc. Massachusetts
Resource Control, Inc. Massachusetts
UWS Barre, Inc. Massachusetts
Rhinelander Disposal Service, Inc. Wisconsin
Roska Route, Inc. Michigan
Saline County Landfill, Inc. Illinois
Salinas Disposal Service, Inc. California
Rural Dispos-All Service, Inc. California
Lewis Road Disposal Site, Inc. California
Johnson Canyon Road Disposal
Site, Inc. California
Madison Lane Properties, Inc. California
Standard Methods, Inc. Massachusetts
Suburban Sanitation Company Kentucky
Tri-County Land Corp. Kentucky
UWS Acquisition, Inc. Massachusetts
UWS Surety, Inc. Vermont
UWS of Rhode Island, Inc. Rhode Island
United Landfill, Inc. West Virginia
United Waste Systems, Inc. Minnesota
United Waste Systems, Inc. Arizona
Baker's Rural Sanitation, Inc. Colorado
Burbridge Trash Service, Inc. Colorado
United Waste Systems (Israel), Inc. Delaware
United Waste Systems Leasing, Inc. Michigan
United Waste Systems New Mexico, Inc. California
United Waste Systems of California, Inc.California
United Waste Systems of Corbin, Inc. Kentucky
Tri-Country Sanitary Landfill, Inc.Kentucky
United Waste Systems of Gardner, Inc. Massachusetts
United Waste Systems of Grand
Rapids, Inc. Michigan
United Waste Systems of Iowa, Inc. Iowa
Central Disposal Systems, Inc. Iowa
Peterson Demolition, Inc. Minnesota
United Waste Systems of Kentucky, Inc. Kentucky
United Waste Systems of
Massachusetts, Inc. Massachusetts
United Waste Systems of Michigan, Inc. Michigan
Michigan Environs, Inc. Michigan
United Waste Systems of
Minneapolis, Inc. Minnesota
United Waste Systems of Minnesota, Inc. Minnesota
Junker Sanitation Services, Inc. Minnesota
Twin City Sanitation, Inc. Minnesota
United Waste Systems of
Mississippi, Inc. Mississippi
Bosarge & Edmonds
Contractors, Inc. Mississippi
United Waste Systems of the
Eastern UP, Inc. Michigan
United Waste Systems of
Trinity County, Inc. California
United Waste Systems of West
Virginia, Inc. Virginia
United Waste Systems of West
Virginia, Inc. West Virginia
Disposal Service, Inc. West Virginia
United Waste Transfer, Inc. Minnesota
UWS Transport, Inc. Delaware
Waste Control Systems, Inc. Minnesota
West Michigan Disposal, Inc. Michigan
Western Land Acquisition, Inc. Rhode Island
Williams Landfill Inc. Kentucky
Zenith/Kremer Waste Systems, Inc. Minnesota
Zenith/Kremer Material Recovery, Inc. Minnesota
Western U.P. Landfill, Inc. Michigan
ANNEX III
Form of Lock-up Agreement
Dated as of March 2, 1997
United Waste Systems, Inc.
Four Greenwich Office Park
Greenwich, CT 06830
Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
United Waste Systems, Inc. (the "Company") proposes to
issue and sell (the "Offering") certain shares of the Company's
common stock, par value $.001 per share (the "Shares").
In connection with the Offering, the Company will enter
into an underwriting agreement with Goldman, Sachs & Co. and
possibly others (the "Underwriters"). The form, terms and
conditions of this agreement, including the Underwriters' purchase
price and the initial offering price, as well as the numbers and
identities of the Underwriters, are to be determined by the Company
and the Underwriters at a later date, and references herein to the
"Underwriting Agreement" mean such document in the form in which it
will eventually be executed and delivered by the parties thereto.
The undersigned, to facilitate the marketing of the
Shares and in consideration of the Company and the Underwriters
entering into the Underwriting Agreement, hereby irrevocably
confirms and agrees for the benefit of the Company and the
Underwriters as follows:
During the period beginning on and including the date
hereof and continuing to and including the 90th day after the date
of the Pricing Agreement relating to the Offering, the undersigned
will not, directly or indirectly, publicly offer, sell, contract to
sell, or otherwise publicly dispose of (which shall be deemed to
include, without limitation, the entering into of any cash-settled
derivative instrument) any Covered Securities (as defined below)
without the prior written consent of Goldman, Sachs & Co. "Covered
Securities" means any Shares, any securities of the Company which
are substantially similar to the Shares and any securities
convertible into or exchangeable or exercisable for Shares or any
such substantially similar securities, which Shares are, on the
date hereof, or become, at any time hereafter, registered in the
name of, or beneficially owned or controlled by, the undersigned.
The agreements set forth herein will terminate
immediately on the 90th day after the date hereof, unless the
Underwriting Agreement has been executed and delivered by the
parties thereto and the closing for any purchases of Shares by the
Underwriters pursuant thereto has occurred prior to such date.
Neither the Company nor any Underwriter makes any representations
as to whether the Offering will be completed.
Very truly yours,
__________________________
Signature
__________________________________
Print Name
ANNEX IV
Pursuant to Section 7(e) of the Underwriting Agreement, the
independent public accountants shall furnish letters to the
Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the
meaning of the Securities Act and the applicable published
rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if
applicable, financial forecasts and/or pro forma financial
information) examined by them and included or incorporated by
reference in the Registration Statement or the Prospectus as
amended or supplemented comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act or the Exchange Act, as applicable, and the
related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with
standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial
statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated
in their reports thereon, copies of which have been
[separately] furnished Representatives [and are attached
hereto];
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public
Accountants of the unaudited condensed consolidated statements
of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus as amended
or supplemented and/or included in the Company's quarterly
reports on Form 10-Q incorporated by reference into the
Prospectus as amended or supplemented as indicated in their
reports thereon copies of which [have been separately
furnished to the Representatives] [are attached hereto]; and
on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial
and accounting matters regarding whether the unaudited
condensed consolidated financial statements referred to in
paragraph (vii)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the Exchange Act and the related published
rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in
all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and
the related published rules and regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and
financial position of the Company for the five most recent
fiscal years included in the Prospectus as amended or
supplemented and included or incorporated by reference in Item
6 of the Company's Annual Report on Form 10-K for the most
recent fiscal year agrees with the corresponding amounts
(after restatement where applicable) in the audited
consolidated financial statements for such five fiscal years
which were included or incorporated by reference in the
Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus
as amended or supplemented under selected captions with the
disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform
in all material respects with the disclosure requirements of
items 301, 302, 402 and 503(d), respectively, of Regulation
S-K;
(vi) On the basis of limited procedures, not constituting
an examination in accordance with generally accepted auditing
standards, consisting of a reading of the unaudited financial
statements and other information referred to below, a reading
of the latest available interim financial statements of the
Company and its subsidiaries, inspection of the minute books
of the Company and its subsidiaries since the date of the
latest audited financial statements included or incorporated
by reference in the Prospectus as amended or supplemented,
inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to
believe that:
(A) (i) the unaudited condensed consolidated statements
of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus as amended
or supplemented and/or included or incorporated by reference
in the Company's Quarterly Reports on Form 10-Q incorporated
by reference in the Prospectus as amended or supplemented do
not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act and the
related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Prospectus as amended or supplemented or included in the
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus as amended or supplemented, for
them to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus as amended or
supplemented do not agree with the corresponding items in the
unaudited consolidated financial statements from which such
data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the
most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus as amended or supplemented but from
which were derived the unaudited condensed financial
statements referred to in clause (A) and any unaudited income
statement data and balance sheet items included in the
Prospectus as amended or supplemented and referred to in
Clause (B) were not determined on a basis substantially
consistent with the basis for the audited financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in
the Prospectus as amended or supplemented do not comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act and the published rules and
regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated
by reference in the Prospectus as amended or supplemented) or
any increase in the consolidated long-term debt of the Company
and its subsidiaries, or any decreases in consolidated net
current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus as
amended or supplemented, except in each case for changes,
increases or decreases which the Prospectus as amended or
supplemented discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus as amended or supplemented to the specified date
referred to in Clause (E) there were any decreases in
consolidated net revenues or income from operations or the
total or per share amounts of consolidated net income or other
items specified by the Representatives, or any increases in
any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus as amended or supplemented
discloses have occurred or may occur or which are described in
such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the
Prospectus as amended or supplemented and the limited
procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (iv) above,
they have carried out certain specified procedures, not
constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the
Representatives which are derived from the general accounting
records of the Company and its subsidiaries, which appear in
the Prospectus as amended or supplemented (excluding documents
incorporated by reference), or in Part II of, or in exhibits
and schedules to, the Registration Statement specified by the
Representatives or in documents incorporated by reference in
the Prospectus as amended or supplemented specified by the
Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting
records of the Company and its subsidiaries and have found
them to be in agreement.
All references in this Annex IV to the Prospectus as amended
or supplemented shall be deemed to refer to the Prospectus as
amended or supplemented (including the documents incorporated by
reference therein) as defined in the Underwriting Agreement as of
the date of the letter delivered on the date of the Pricing
Agreement for purposes of such letter and to the Prospectus as
amended or supplemented (including the documents incorporated by
reference therein) in relation to the applicable Designated Shares
for purposes of the letter delivered at the Time of Delivery for
such Designated Shares.
ANNEX V
March 6, 1997
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Deutsche Morgan Grenfell Inc.
As Representatives of the several Underwriters
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
We have acted as counsel to United Waste Systems, Inc., a
Delaware corporation (the "Company"), in connection with the issue
and sale to you of an aggregate of 3,000,000 shares of Common
Stock, par value $.001 per share, of the Company (the "Shares").
This opinion is rendered pursuant to Section 7(c) of the
Underwriting Agreement dated March 3, 1997 by and among the Company
and you (the "Underwriting Agreement"). All capitalized terms not
otherwise defined herein are defined as set forth in the
Underwriting Agreement.
As to various questions of fact material to our opinion, we
have relied upon the representations made in the Underwriting
Agreement, upon certificates of officers and upon certificates of
public officials. With regard to the due incorporation of
corporations other than the Company and the good standing of
corporations (other than the Company), we have (subject to the next
sentence) relied entirely upon certificates of public officials.
With regard to the tax good standing of certain corporations (other
than the Company), we have relied solely upon a certificate of an
officer of such corporation to the effect that the corporation has
filed the most recent annual report required by the law of such
jurisdiction and that all franchise taxes required to be paid under
such law have been paid. We have assumed that you have made
payment in full for the Shares, as set forth in the Underwriting
Agreement. We have also examined such corporate documents and
records and other certificates, and have made such investigations
of law, as we have deemed necessary in order to render the opinion
hereinafter set forth. We have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all
signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as
copies. We have also assumed that all documents examined by us
have been duly and validly authorized, executed and delivered by
each of the parties thereto other than the Company.
Based upon and subject to the foregoing, we render the
following opinion:
1. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with corporate power and
authority to conduct its business and to own or lease all the
assets owned or leased by it, in each case as described in the
Prospectus as amended or supplemented.
2. Each of the subsidiaries of the Company identified
on Schedule I hereto has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with corporate power
and authority to conduct its business and to own or lease all
the assets owned or leased by it, in each case as described in
the Prospectus as amended or supplemented.
3. Each of the Company and the subsidiaries of the
Company identified on Schedule I hereto has been duly licensed
or qualified to do business and is in good standing as a
foreign corporation under the laws of each jurisdiction (other
than its jurisdiction of incorporation) in which the nature of
the activities conducted by it or the character of the assets
owned by it make such licensing or qualification necessary,
except where the failure to be so licensed or qualified does
not have a material adverse effect on the condition (financial
or otherwise) of the Company and its subsidiaries taken as a
whole.
4. The Company (or a subsidiary of the Company of which
the Company is the sole record owner) is the sole record owner
of the issued shares of capital stock of each of the
subsidiaries of the Company identified on Schedule I hereto.
5. To the best of our knowledge, the Company has no
subsidiaries (as such term is defined in the rules and
regulations under the Securities Act), other than inactive
subsidiaries, except as set forth in Schedule I hereto.
6. The authorized capital stock of the Company is as
set forth in the Prospectus as amended or supplemented under
the captions "Description of Preferred Stock", "Description of
Common Stock", "Description of Warrants" and "Capitalization".
The information in the Prospectus as amended or supplemented
under the caption "Capitalization" with respect to the number
of shares of the Company's capital stock outstanding, and
reserved for issuance upon the exercise or conversion of the
Company's 4 1/2% Convertible Subordinated Notes due 2001, is
correct as of the dates indicated. The description of the
Shares contained in the Prospectus as amended or supplemented
conforms to the terms thereof contained in the Company's
certificate of incorporation.
7. All of the outstanding shares of capital stock
(including the Shares being delivered on the date hereof) of
the Company have been duly authorized and are validly issued,
fully paid and nonassessable and are not subject to any
preemptive right arising by statute or under the Company's
certificate of incorporation or by-laws or, to the best of our
knowledge, any similar right.
8. No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body is required for the issue and sale
by the Company of the Shares or the consummation by the
Company of the transactions contemplated by the Underwriting
Agreement, except such as have been obtained under the
Securities Act, the qualification of the Designated Shares for
quotation on the Nasdaq National Market and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state or foreign securities or Blue Sky
laws in connection with the purchase and distribution of the
Shares by the Underwriters.
9. The statements set forth in the Prospectus as
amended or supplemented under the captions "Description of
Preferred Stock", "Description of Common Stock" and
"Description of Warrants", insofar as they purport to
constitute a summary of the terms of the Preferred Stock,
Shares or Warrants described therein, are accurate summaries
in all material respects of such terms. The statements set
forth in the Prospectus as amended or supplemented under the
caption "Plan of Distribution" and "Underwriting", insofar as
they purport to constitute a summary or description of the
provisions of the Underwriting Agreement and lock-up letters
and laws, rules or regulations referred to therein, are
accurate summaries or descriptions in all material respects of
such provisions or such laws, rules or regulations.
10. The Company has full corporate power and authority
to enter into the Underwriting Agreement, and the Underwriting
Agreement has duly authorized, executed and delivered by the
Company.
11. The issue and sale of the Designated Shares being
sold on the date hereof and the compliance by the Company with
all of the provisions of the Underwriting Agreement and the
consummation of the transactions therein contemplated do not
and will not (A) violate the provisions of the certificate of
incorporation or by-laws of the Company or any of its
subsidiaries, (B) to the best of our knowledge, result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, or give any other party a right to
terminate any of its obligations under, or result in the
acceleration of any obligation under, (i) any statute, rule or
regulation of the State of New York or the United States of
America or included in the General Corporation Law of the
State of Delaware (except that we express no opinion as to the
securities or Blue Sky laws of any state), (ii) any material
indenture, mortgage, deed of trust, voting trust agreement,
loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement
or instrument known to us to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective properties is bound or
(iii) any judgment, decree or order of any court or other
governmental agency or body known to us and by which the
Company or any of its subsidiaries or any of their respective
properties is bound or (C) to the best of our knowledge,
result in the creation of any lien, charge or encumbrance upon
any of the assets of the Company or any of its subsidiaries
under any agreement, instrument, judgment, decree or order
referred to in clause (B)(ii) or (iii) above.
12. To the best of our knowledge, except as set forth in
or contemplated by the Prospectus as amended or supplemented,
there are no actions, suits or proceedings pending or
threatened before or by any federal or state court,
commission, regulatory body, administrative agency or other
governmental body to which the Company or any of its
subsidiaries, or any of their respective officers as such is
a party, or the subject of which is any of the property of any
of the aforementioned entities which are required to be
described in the Prospectus as amended or supplemented and
that are not described as so required.
13. To the best of our knowledge, neither the Company
nor any of its subsidiaries identified on Schedule I hereto is
in violation of its certificate of incorporation, by-laws or
other charter documents.
14. To the best of our knowledge, except as set forth in
or contemplated by the Prospectus as amended or supplemented,
neither the Company nor any of its subsidiaries identified on
Schedule I hereto is (A) in default (nor has an event occurred
which with notice or lapse of time or both would constitute a
default) in the performance or observance of any obligation,
covenant agreement or condition contained in any indenture,
mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement or other evidence
of indebtedness, lease, contract or other agreement known to
us to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of
their properties may be bound, or (B) in violation of any
judgment, decree or order of any court or other governmental
agency or body known to us and by which the Company or any of
its subsidiaries or any of their respective properties is
bound, which default referred to in clause (A) or violation
referred to in clause (B) is required to be described in the
Prospectus as amended or supplemented and is not described as
so required or would reasonably be expected to have a Material
Adverse Effect or would affect the validity of the Shares.
15. The Company is not, and upon the issuance and sale
of the Shares will not be, and will not be, directly or
indirectly, controlled by, an investment company that is or is
required to be registered under the Investment Company Act.
16. The reports filed by the Company pursuant to the
Exchange Act, and incorporated by reference in the
Registration Statement (other than the financial statements
and related schedules therein, as to which we express no
opinion), when they were filed with the Commission, complied
as to form in all material respects with the requirements of
the Exchange Act, and the rules and regulations of the
Commission thereunder;.
17. The Designated Shares being sold on the date hereof
have been duly authorized for quotation on the Nasdaq National
Market.
We have reviewed the Prospectus as amended or supplemented,
participated in discussion with your representatives and those of
the Company, its accountants and its other counsel. (We draw your
attention to the fact that Proskauer Rose Goetz & Mendelsohn LLP
has acted as special environmental counsel to the Company in
connection with the preparation of the Prospectus as amended or
supplemented.) Although we have not undertaken, except as
otherwise indicated in this opinion, to investigate or verify
independently, and, except for those portions of the Registration
Statement referred to in the opinion in paragraphs (6) and (9), do
not assume responsibility for, the accuracy, completeness or
fairness of the statements contained in the Prospectus or any
amendment thereof or supplement thereto, on the basis of the
information that we gained in the course of the performance of such
services and our representation of the Company, we confirm to you
that nothing that came to our attention in the course of such
review or representation has caused us to believe that:
(i) the documents incorporated by reference in the Prospectus
as amended or supplemented (except that we express no view as
to (i) financial statements, schedules and other financial
data or (ii) as to statistical data reviewed by Proskauer Rose
Goetz & Mendelsohn LLP in its capacity as special
environmental counsel), when they became effective or were
filed with the Commission, as the case may be, contained, in
the case of a registration statement which became effective
under the Securities Act, an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were
filed under the Securities Act or the Exchange Act with the
Commission, an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made when such documents were so filed, not
misleading or
(ii) the Registration Statement and the Prospectus as amended
or supplemented, and any further amendments and supplements
thereto made by the Company prior to the date and time of this
opinion (except that we express no view as to (i) financial
statements, schedules and other financial data or (ii) as to
statistical data reviewed by Proskauer Rose Goetz & Mendelsohn
LLP in its capacity as special environmental counsel), does
not comply as to form in all material respects with the
requirements of the Securities Act and the rules and
regulations thereunder; or that, as of its effective date, the
Registration Statement or any further amendment thereto made
by the Company prior to the date and time of this opinion
(except that we express no view as to (i) financial
statements, schedules and other financial data or (ii) as to
statistical data reviewed by Proskauer Rose Goetz & Mendelsohn
LLP in its capacity as special environmental counsel)
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or the Prospectus as
amended or supplemented with respect to the Designated Shares
or any further amendment or supplement thereto made by the
Company prior to the date and time of this opinion (except
that we express no view as to (i) financial statements,
schedules and other financial data or (ii) as to statistical
data reviewed by Proskauer Rose Goetz & Mendelsohn LLP in its
capacity as special environmental counsel) contained an untrue
statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading
or that, as of the date and time of this opinion, either the
Registration Statement or the Prospectus as amended or
supplemented or any further amendment or supplement thereto
made by the Company prior to the date and time of this opinion
(except that we express no view as to (i) financial
statements, schedules and other financial data or (ii) as to
statistical data reviewed by Proskauer Rose Goetz & Mendelsohn
LLP in its capacity as special environmental counsel) contains
an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; or that any amendment to the Registration
Statement required to be filed or any contracts or other
documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by
reference into the Prospectus as amended or supplemented or
required to be described in the Registration Statement or the
Prospectus as amended or supplemented which has not been filed
or incorporated by reference or described as required
The opinions set forth herein are limited to the laws of the
State of New York, the General Corporation Law of the State of
Delaware, and the federal laws of the United States.
This opinion is rendered to you and is solely for your benefit
in connection with the transactions contemplated by the
Underwriting Agreement. Except as contemplated by the Prospectus
as amended or supplemented, this opinion may not be relied upon by
you for any other purpose or furnished to, quoted or relied upon by
any other person, firm or corporation for any purpose without our
prior written consent.
Very truly yours,
EHRENREICH & KRAUSE
By:
A Member of the Firm
ANNEX VI
March 6, 1997
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Deutsche Morgan Grenfell Inc.
As Representatives of the several Underwriters
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
We have acted as special environmental counsel to United Waste
Systems, Inc., a Delaware corporation (the "Company"), in
connection with the issue and sale to you of an aggregate of
3,000,000 shares of the Company's Common Stock, par value $.001 per
share (the "Shares"). This opinion is rendered pursuant to
Section 7(d) of the Underwriting Agreement dated March 3, 1997 by
and among the Company and you (the "Underwriting Agreement"). All
capitalized terms not otherwise defined herein are defined as set
forth in the Underwriting Agreement.
As to various questions of fact material to our opinion, we
have relied upon the representations made in the Underwriting
Agreement, upon certificates of officers and upon certificates of
public officials. We have also examined such documents and records
and other certificates, and have made such investigations of law,
as we have deemed necessary in order to render the opinion
hereinafter set forth. We have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all
signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as
copies. We have also assumed that all documents examined by us
have been duly and validly authorized, executed and delivered by
each of the parties thereto other than the Company. We are aware
that, in connection with the offering of the Shares, the Company
has been represented generally by Ehrenreich & Krause.
Based upon and subject to the foregoing, we render the
following opinion:
1. The statements in the Prospectus as amended or
supplemented relating to the Designated Shares or any further
amendment or supplement thereto made by the Company prior to
the date and time of this Opinion (the "Prospectus") under the
caption, "Risk Factors" and the statements under the captions
"Item 1. Business Industry Background", "Business Operations",
"Business Environmental Regulations" and "Business Factors
that May Influence Future Results and Accuracy of Forward-Looking
Statements Environmental and Land Use Matters", in the
first paragraph under the caption "Item 3. Legal Proceedings"
in the Form 10-K, incorporated by reference in the
Registration Statement, in note 4 to the financial statements
of the Company included in the Company's Form 10-Q for the
quarter ended September 30, 1996, and in note 4 to the
financial statements of the Company included in the Company's
Form 10-Q for the quarter ended June 30, 1996, each as
supplemented and modified in the Prospectus under the caption
"Risk Factors", insofar as such statements purport to
constitute a description of specific rules, laws and
regulations relating to the generation, use, discharge,
treatment, storage and disposal of pollutants, hazardous or
toxic substances, land use and protection of health or the
environment ("Environmental Requirements"), are accurate
descriptions of the information contained therein.
2. To the best of our knowledge, except as set forth in
or contemplated by the Prospectus, there are no actions, suits
or proceedings pending, or threatened, before or by any
federal or state court, commission, regulatory body,
administrative agency or other governmental body relating to
Environmental Requirements to which the Company or any of its
subsidiaries or any of their respective officers as such is a
party, or the subject of which is any of the property of any
of the aforementioned entities which are required to be
described in the Prospectus and that are not described as so
required.
3. To the best of our knowledge, except as set forth in
or contemplated by the Prospectus, neither the Company nor any
of its subsidiaries is in violation of any judgment, decree or
order related to Environmental Requirements of any court or
other governmental agency or body known to us and by which the
Company or any of its subsidiaries or any of their respective
properties is bound, which violation would have a Material
Adverse Effect.
We have participated in the preparation of the Prospectus
Supplement, dated March 3, 1997, solely in our capacity as special
environmental counsel to the Company. In this capacity and
connection, nothing has come to our attention which has caused us
to believe:
(i) that, as of its effective date, the Registration Statement
or any further amendment thereto made by the Company prior to
the date and time of this Opinion (except that we express no
view as to financial statements, schedules and other financial
and statistical data, other than statistical data reviewed by
us in our capacity as special environmental counsel, contained
in the Registration Statement or the documents incorporated
therein) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
(ii) that either, as of its date and as of the date and time
of this Opinion, the Prospectus or, as of the date and time of
this Opinion, the Registration Statement (except that we
express no view as to financial statements, schedules and
other financial and statistical data, other than statistical
data reviewed by us in our capacity as special environmental
counsel, contained in the Prospectus, the Registration
Statement or the documents incorporated therein) contained or
contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
The opinions set forth herein are limited to the laws of the
State of New York and the federal laws of the United States. No
opinion is expressed herein as to the laws of any jurisdiction
outside the United States.
This opinion is rendered to you and is solely for your benefit
in connection with the transactions contemplated by the
Underwriting Agreement. This opinion may not be relied upon by you
for any other purpose or furnished to, quoted or relied upon by any
other person, firm or corporation for any purpose without our prior
written consent, except that it may be referred to in the
Prospectus and in closing documents prepared in connection with the
transactions contemplated by the Underwriting Agreement.
Very truly yours,
PROSKAUER ROSE GOETZ &
MENDELSOHN LLP
By: _________________________
A Member of the Firm
Exhibit 11.1
UNITED WASTE SYSTEMS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Year Ended
December 31, 1996
Primary:
Net Income $ 35,029,512
Historical weighted average
common shares outstanding 37,302,510
Dilution of common stock options
and warrants (1) 2,641,205
Weighted average commmon shares
outstanding 39,943,715
Earnings per common share $ .88
Fully Diluted:
Net Income $ 35,029,512
Interest on convertible
debt 2,250,000
Earnings available to
stockholders $ 37,279,512
Historical weighted average
common shares outstanding 37,302,510
Dilution of common stock options
and warrants (1) 3,047,212
Assumed conversion of convertible
debt 2,564,103
Weighted average commmon shares
outstanding 42,913,825
Earnings per common share $ .87
UNITED WASTE SYSTEMS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Year Ended
December 31, 1995
Primary:
Net Income available to common stock holders $ 26,457,583
Historical weighted average
common shares outstanding 31,369,349
Dilution of common stock options
and warrants (1) 2,600,902
Assumed conversion of convertible
preferred stock 723,250
Weighted average commmon shares
outstanding 34,693,501
Earnings per common share $ .77
Fully Diluted:
Net Income $ 26,830,084
Historical weighted average
common shares outstanding 31,369,349
Dilution of common stock options
and warrants (1) 2,806,202
Assumed conversion of convertible
preferred stock 723,250
Weighted average commmon shares
outstanding 34,898,801
Earnings per common share $ .77
UNITED WASTE SYSTEMS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Year Ended
December 31, 1994
Primary:
Net Income $ 18,944,926
Dividends on preferred stock (1,275,180)
Earnings available to
stockholders $ 17,669,746
Historical weighted average
common shares outstanding 24,229,869
Dilution of common stock options
and warrants (1) 1,846,552
Weighted average commmon shares
outstanding 26,076,421
Earnings per common share $ .68
Fully Diluted:
Net Income $ 18,944,926
Historical weighted average
common shares outstanding 24,229,869
Dilution of common stock options
and warrants (1) 12,441,830
Assume conversion of convertible
preferred stock 2,481,990
Weighted average commmon shares
outstanding 29,153,689
Earnings per common share $ .65
__________
(1) Based upon the treasury stock approach
Exhibit 12.1
<TABLE>
UNITED WASTE SYSTEMS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<CAPTION>
Years ended December 31,
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Pretax income
from continuing
operations $ 3,268,555 $ 16,485,591 $ 28,953,722 $43,609,343 $60,649,078
Fixed charges 3,309,877 5,179,058 7,335,587 11,713,791 17,383,361
Less:
Capitalized
interest (156,897) (301,000) (722,000) (1,349,000) (1,682,000)
Amortization of
previously
capitalized
interest 145,916 125,849 173,983 263,916 376,049
Total earnings $6,567,451 $ 21,489,498 $35,741,292 $ 54,238,050 $76,726,488
Interest
expense $ 3,028,133 $ 4,705,363 $ 6,424,630 $ 10,061,290 $14,949,746
Interest
capitalized 156,897 301,000 722,000 1,349,000 1,682,000
Amortization
of debt
issue costs 52,523 123,470 146,134 260,000 647,115
Interest portion
of rental
expense 72,324 49,225 42,823 43,501 104,500
Total fixed
charges $ 3,309,877 $ 5,179,058 $ 7,335,587 $11,713,791 $17,383,361
Ratio of
earnings to
fixed charges 2.0 4.1 4.9 4.6 4.4
</TABLE>
<TABLE>
UNITED WASTE SYSTEMS, INC.
RATIO OF EARNINGS TO FIXED CHARGES - cont'd
(UNAUDITED)
<CAPTION>
Years ended December 31,
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Preferred
dividends 1,849,873 1,948,315 1,275,180 372,501 0
Total fixed charges
and preferred
dividends $5,159,750 $ 7,127,373 $8,610,767 $12,086,292 $17,383,361
Ratio of earnings to
fixed charged and
preferred dividends 1.3 3.0 4.2 4.5 4.4
</TABLE>
Exhibit 21.1
December 31, 1995
UNITED WASTE SYSTEMS, INC.
These corporations are 100% owned by United Waste Systems,
Inc. (the" Registrant"). Those corporations which are indented
are 100% owned by its parent above.
Name State of Incorporation
Able Sanitation, Inc. Michigan
United Waste Systems of
Central Michigan, Inc. Michigan
Benson Brothers
Disposal, Inc. New York
Carmel Marina Corporation California
Neal Road Landfill
Corporation California
Jolon Road Landfill
Corporation California
Cal Sanitation Services,
Inc. California
Portable Site Services, Inc. California
Connecticut Valley Sanitary
Waste Disposal, Inc. Massachusetts
Dakota Resource Recovery,
Inc. Minnesota
Laurel Ridge Landfill, Inc. Kentucky
Glen's Sanitary Landfill,
Inc. Michigan
Harland's Sanitary Landfill,
Inc. Michigan
Holyoke Sanitary Landfill,
Inc. Massachusetts
K and W Landfill, Inc. Michigan
Kelly Run Sanitation, Inc. Pennsylvania
Ken's Pickup Service, Inc. Michigan
Knutson Services, Inc. Minnesota
Knutson Material Recovery
Facility, Inc. Minnesota
Northern A-1 Sanitation
Services, Inc. Michigan
PRTR, Inc. Massachusetts
Peninsula Sanitation, Inc. Michigan
RCI Clinton, Inc. Massachusetts
RCI Fitchburg, Inc. Massachusetts
RCI Hudson, Inc. Massachusetts
Re-Cy-Co, Inc. Minnesota
Resource Control Composting,
Inc. Massachusetts
Resource Control, Inc. Massachusetts
Rhinelander Disposal Service,
Inc. Wisconsin
Roska Route, Inc. Michigan
Standard Methods, Inc. Massachusetts
Suburban Sanitation Company Kentucky
Tri-County Land Corp. Kentucky
UWS Acquisition, Inc. Massachusetts
UWS Surety, Inc. Vermont
United Landfill, Inc. West Virginia
United Waste Systems (Israel),
Inc. Delaware
United Waste Systems
of California, Inc. California
United Waste Systems
of Corbin, Inc. Kentucky
Tri-County Sanitary
Landfill, Inc. Kentucky
United Waste Systems of
Grand Rapids, Inc. Michigan
United Waste Systems
of Iowa, Inc. Iowa
Central Disposal
Systems, Inc. Iowa
Peterson Demolition, Inc. Iowa
United Waste Systems
of Kentucky, Inc. Kentucky
United Waste Systems
of Massachusetts, Inc. Massachusetts
United Waste Systems
Hauling, Inc. Massachusetts
United Waste Systems
of Michigan, Inc. Michigan
Michigan Environs, Inc. Michigan
United Waste Systems of
Minnesota, Inc. Minnesota
Junker Sanitation
Services, Inc. Minnesota
Twin City Sanitation, Inc.Minnesota
United Waste Systems of
Mississippi, Inc. Mississippi
Bosarge & Edmonds
Contractors, Inc. Mississippi
United Waste Systems of
Virginia, Inc. Virginia
United Waste Systems of
West Virginia, Inc. West Virginia
Disposal Service, Inc. West Virginia
United Waste Transfer, Inc. Minnesota
UWS Transport, Inc. Delaware
Waste Control Systems, Inc. Minnesota
West Michigan Disposal, Inc. Michigan
Williams Landfill Inc. Kentucky
Zenith/Kremer Waste Systems,
Inc. Minnesota
Zenith/Kremer Material
Recovery, Inc. Minnesota
A-1 Transfer, Inc. Colorado
Estes Park Investments, Inc. Colorado
M&S Investments, Inc. Colorado
Andersen-Cottonwood Disposal
Service, Inc. California
Colusa Solid Waste Recycling,
Inc. California
Corning Disposal Service,Inc. California
Nevada City Garbage Service,
Inc. California
Clayton Ward Company, Inc. California
Great Northern Sanitary, Inc. California
S&L Total Waste Systems, Inc. Nevada
CDF Consolidated Corporation Illinois
Central Sanitary Landfill, Inc.Michigan
Cheshire Sanition, Inc. New Hampshire
Colorado Waste Services, Inc. Colorado
Wilson Leasing, Inc. Colorado
Commercial Disposal Co., Inc. Massachusetts
DSI of Shawano County, Inc. Wisconsin
Dafter Sanitary Landfill, Inc.Michigan
Dietrich Sanitary Service, Inc.North Dakota
HCS Sanitation, Inc. North Dakota
Jahner Sanitation, Inc. North Dakota
Jones Sanitation, Inc. Kentucky
Landfill Systems, Inc. New Mexico
Landfill Hauling Systems, Inc.New Mexico
McDaniel Landfill, Inc. North Dakota
Midwest Sanitation Service,Inc. North Dakota
Pando Disposal Services, Inc. Colorado
Pak'M Roll-off Services, Inc. Colorado
Salinas Disposal Service, Inc. California
Rural Dispos-All Serivce, Inc. California
Lewis Road Disposal Site, Inc.California
Johnson Canyon Road Disposal
Site, Inc. California
Madison Lane Properties, Inc. California
UWS Barre, Inc. Massachusetts
UWS of Rhode Island, Inc. Rhode Island
United Waste Systems, Inc. Minnesota
United Waste Systems, Inc. Arizona
Arizonia Reliable Services
Company, Inc. Arizona
Baker's Rural Sanitation,
Inc. Colorado
Burbridge Trash Service, Inc. Colorado
United Waste Systems (Israel),
Inc. Delaware
United Waste Sytems
Leasing, Inc. Michigan
United Waste Systems New
Mexico, Inc. New Mexico
United Waste Systems of
Gardner, Inc. Massachusetts
United Waste Systems of
Minneapolis, Inc. Minnesota
United Waste Systems of
Eastern UP, Inc. Michigan
United Waste Systems of
Trinity County, Inc. California
Western Land Acquisition, Inc. Rhode Island
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in (i) the
Registration Statements (Form S-3 Numbers: 33-74676; 33-62420;
33-83564; 33-90262; 33-91370; 33-95662; 33-98146; 33-80403; 333-1890;
333-07991; 333-11109; 333-13111; 333-14083; 333-18387; 333-19029;
333-19299; and 333-22825 and any amendments thereto) and
the related Prospectuses and (ii) the Registration Statement
(Form S-8 Numbers: 33-98794, 333-04294 and 333-14489 and any
amendments thereto) and the related Prospectuses pertaining to the
1992 Stock Option Plan, Disinterested Director Stock Option Plan
and the options granted outside of the above referenced plans
under individual written compensation contracts with employees of
United Waste Systems, Inc., of our report dated February 21, 1997
(except for Note 13, as to which the date is March 25, 1997) with
respect to the consolidated financial statements and schedule of
United Waste Systems, Inc. included in this Annual Report on Form
10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission.
Ernst & Young LLP
MetroPark, New Jersey
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,567,854
<SECURITIES> 0
<RECEIVABLES> 58,039,664
<ALLOWANCES> 3,076,000
<INVENTORY> 0
<CURRENT-ASSETS> 87,520,828
<PP&E> 482,387,638
<DEPRECIATION> 94,407,414
<TOTAL-ASSETS> 801,041,694
<CURRENT-LIABILITIES> 75,699,646
<BONDS> 311,977,415
0
0
<COMMON> 39,090
<OTHER-SE> 318,674,323
<TOTAL-LIABILITY-AND-EQUITY> 801,041,694
<SALES> 0
<TOTAL-REVENUES> 335,743,175
<CGS> 0
<TOTAL-COSTS> 206,786,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,949,746
<INCOME-PRETAX> 60,649,078
<INCOME-TAX> 25,619,566
<INCOME-CONTINUING> 35,029,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,029,512
<EPS-PRIMARY> .88
<EPS-DILUTED> .87
</TABLE>
Exhibit 99.1
November 21, 1995
To the Board of Directors and Owners
of Carmel Marina Corporation and Affiliates
Castroville, California
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying combined balance sheet of Carmel
Marina Corporation and Affiliates as of December 31, 1994 and the
related combined statements of operations and owners' equity, and
cash flows for the year then ended. These financial statements are
the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position
of Carmel Marina Corporation and Affiliates as of December 31,
1994, and the combined results of their operations and their cash
flows for the year then ended in conformity with generally accepted
accounting principles.
As described in Notes 1 and 11 to the financial statements, the
combined financial statements include certain companies and
affiliated entities and properties, all of which have common
ownership. In 1993 the reporting entity included only the accounts
of Carmel Marina Corporation and Pacific Valley Disposal
Corporation
HANSON ROTTER GREEN
CERTIFIED PUBLIC ACCOUNTANTS
