SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
POST-EFFECTIVE AMENDMENT NO. 1
ON FORM S-1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
United Waste Systems, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 4593 13-3532338
(State or Other (PRIMARY STANDARD (I.R.S. EMPLOYER
Jurisdiction of INDUSTRIAL IDENTIFICATION NO.)
Incorporation or CLASSIFICATION CODE
Organization) NUMBER)
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
___________________
GREGORY T. SANGALIS
UNITED WASTE SYSTEMS, INC.
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
___________________
A COPY OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO
THE AGENT FOR SERVICE, SHOULD BE SENT TO:
THOMAS J. MURPHY, P.C.
MCDERMOTT, WILL & EMERY
277 WEST MONROE STREET
CHICAGO, IL 60606-5096
(312) 372-2000
___________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after this Registration Statement becomes effective.
___________________
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
PROSPECTUS
UNITED WASTE SYSTEMS, INC.
4 1/2% Convertible Subordinated Notes due June 1, 2001
This Prospectus relates to up to $137,800,000 principal amount of 4 1/2%
Convertible Subordinated Notes due June 1, 2001 (the "Notes") of United Waste
Systems, Inc. a Delaware Corporation (the "Company"), that may from time to time
be sold by the Selling Security Holders (as defined under "Selling Security
Holders"). The Notes are convertible into shares of the common stock, par value
$0.01 per share (the "USA Waste Common Stock"), of USA Waste Services, Inc., a
Delaware corporation ("USA Waste"). The Company will not receive any of the
proceeds from sales of Notes by the Selling Security Holders.
The Notes covered by this Prospectus represent a portion of the principal
amount of Notes that were originally issued by the Company to a group of
underwriters on June 5, 1996, pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
provided by Section 4(2) thereof. The Notes were sold simultaneously by such
underwriters in transactions exempt from the registration requirements of the
Securities Act pursuant to Rule 144A, Regulation D or Regulation S under the
Securities Act.
The Notes that may be offered by the Selling Security Holders pursuant to
this Prospectus may be sold from time to time by the Selling Security Holders
directly to purchasers or, alternatively, may be offered from time to time
through agents, brokers, dealers or underwriters, who may receive compensation
in the form of concessions or commissions from the Selling Security Holders or
purchasers of the Notes (which compensation may be in excess of customary
commissions). Any agents, brokers, dealers or underwriters that participate in
the distribution of the Notes may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions received by them and any
profit on the resale of any Notes purchased by them might be deemed to be
underwriting discounts or commissions under the Securities Act. See "Selling
Security Holders" and "Plan of Distribution".
On August 26, 1997, a wholly-owned subsidiary of USA Waste was merged with
and into the Company (the "Merger") and the Company became a wholly-owned
subsidiary of USA Waste. Pursuant to the Merger, each holder of the common
stock, par value $0.001 per share, of the Company (the "United Common Stock")
was entitled to receive 1.075 shares of USA Waste Common Stock for each share of
United Common Stock held by such holder. Simultaneously with the consummation
of the Merger, the Company, USA Waste and Bankers Trust Company, as Trustee (the
"Trustee") entered into a Supplemental Indenture (the "Supplemental Indenture"),
dated as of August 26, 1997, supplementing and amending that certain Indenture
with respect to the Notes (the "Indenture"), dated as of June 5, 1996, between
the Company and the Trustee. Pursuant to the Supplemental Indenture, the Notes
became convertible into shares of USA Waste Common Stock.
The Notes are convertible into shares of USA Waste Common Stock, at any
time prior to the close of business on June 1, 2001 (the "Maturity Date"),
unless previously redeemed or repurchased, at a conversion price of $30.23 per
share (equivalent to a conversion rate of 33.079722 shares per $1,000 principal
amount of Notes), subject to adjustment in certain events.
Interest on the Notes is payable on June 1 and December 1 of each year and
the Notes mature on June 1, 2001. The Notes are not entitled to any sinking
fund.
The Notes are redeemable (a) in the event of certain developments involving
U.S. withholding taxes or certification requirements (as described under
"Description of Notes-Redemption-Redemption for Taxation Reasons") at a
redemption price of 100% of the principal amount of the Notes to be redeemed,
plus accrued interest to the redemption date and (b) at the option of the
Company, on or after June 1, 1999, in whole or in part, at the redemption prices
set forth herein, plus accrued interest to the redemption date (as described
under "Description of Notes-Redemption-Optional Redemption").
In the event of a Change in Control (as defined), each holder of Notes may
require the Company to repurchase its Notes, in whole or in part, for cash or,
at the Company's option, common stock (valued at 95% of the average of the
closing prices for the five trading days immediately preceding and including the
third trading day prior to the repurchase date), at a repurchase price of 100%
of the principal amount of Notes to be repurchased, plus accrued interest to the
repurchase date. See "Description of Notes-Repurchase at Option of Holders Upon
a Change in Control".
The Notes are unsecured obligations of the Company subordinated in right of
payment to all existing and future Senior Indebtedness (as defined) of the
Company and are effectively subordinated in right of payment to all indebtedness
and other liabilities of the Company's subsidiaries. As of September 30, 1997,
the aggregate amount of outstanding Senior Indebtedness of the Company was
approximately $39.1 million. As of September 30, 1997, subsidiaries of the
Company had approximately $16.5 million of indebtedness outstanding (other than
indebtedness to the Company). The Indenture under which the Notes were issued
does not restrict the Company or its subsidiaries from incurring additional
Senior Indebtedness or other indebtedness. See "Description of
Notes-Subordination".
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
THE CAPTION "RISK FACTORS" COMMENCING ON PAGE 8.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is November 10, 1997
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING SECURITY HOLDER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER OF ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON WHERE
SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
The terms "the Company" and "United" as used herein refer solely to United
Waste Systems, Inc. and not its subsidiaries (except under the caption "Risk
Factors" or as the context requires otherwise).
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 6
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
RATIO OF EARNINGS TO FIXED CHARGES . . . . . . . . . . . . . . . . . . . . 14
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Summary of Selected Financial Data . . . . . . . . . . . . . . . . . . . . 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . 17
DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DESCRIPTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
DESCRIPTION OF REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . 50
CERTAIN TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 52
SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 59
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE . . . . . . . . . . 64
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 73
DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . 99
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 100
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION . . . . . . . . 103
BENEFICIAL OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . 104
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Regional Offices of the Commission at Seven
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company makes certain filings with the Commission electronically. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3, as amended (the "Registration Statement"), under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto, as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the securities offered hereby, reference is hereby made to such
Registration Statement and the exhibits filed therewith or incorporated therein
by reference. The Registration Statement, including the exhibits filed
therewith or incorporated therein by reference, may be inspected without charge
at the public reference facilities maintained by the Commission and at the
Commission's regional offices at the addresses stated above. Copies of these
documents may be obtained from the Public Reference Section of the Commission at
its office in Washington, D.C., set forth above at prescribed rates.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance,
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. These forward-looking statements were based on various
factors and were derived utilizing numerous important assumptions and other
important factors that could cause actual results to differ materially from
those in the forward-looking statements. Important assumptions and other
important factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not limited to:
uncertainty as to the Company's future profitability; the Company's ability to
develop and implement operational and financial systems to manage rapidly
growing operations; competition in the Company's existing and potential future
lines of business; the Company's ability to integrate and successfully operate
acquired businesses and the risks associated with such businesses; trends in the
solid waste management industry; competitive pressures; changes in relationships
with customers; changes in the regulatory environment; outcome of pending
litigation and regulatory inquiries; and the impact of accounting policies
required to be adopted in the near future. Other factors and assumptions not
identified above were also involved in the derivation of these forward-looking
statements, and the failure of such other assumptions to be realized as well as
other factors may also cause actual results to differ materially from those
projected. The Company does not assume any obligation to update these forward-
looking statements to reflect actual results, changes in assumptions or changes
in other factors affecting such forward-looking statements.
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
SECURITIES TO WHICH THIS PROSPECTUS RELATES
This Prospectus relates to up to $137,800,000 principal amount of 4 1/2%
Convertible Subordinated Notes due June 1, 2001 (the "Notes") of the Company
(but not including any Notes that are in bearer form or that were converted from
bearer to registered form after August 29, 1996) that may from time to time be
sold by the Selling Security Holders.
CERTAIN INFORMATION RELATING TO THE NOTES
Amount Outstanding
As of August 26, 1997, there was outstanding an aggregate of $150,000,000
principal amount of Notes.
Form and Denomination
A portion of the outstanding Notes are in the form of registered Notes
without coupons ("Registered Notes") and a portion are in the form of bearer
notes with coupons attached ("Bearer Notes"). The Registered Notes may be issued
in denominations of $1,000 and integral multiples of $1,000 in excess thereof.
Bearer Notes may be issued only in denominations of $5,000. This Prospectus
does not cover any Bearer Notes (or any Registered Notes that were issued after
August 29, 1996, in exchange for Bearer Notes).
Conversion
The Notes are convertible into shares of USA Waste Common Stock at any time
prior to the close of business on the Maturity Date, unless previously redeemed
or repurchased, at a conversion price of $30.23 per share (equivalent to a
conversion rate of 33.079722 shares per $1,000 principal amount of Notes),
subject to adjustment in certain events. Holders of Notes called for redemption
will be entitled to convert the Notes to and including, but not after, the close
of business on the fifth trading day next preceding the date fixed for
redemption. The right to convert a Note delivered for repurchase will terminate
at the close of business on the second trading day preceding the repurchase
date.
Optional Redemption
The Notes are redeemable (a) as described below under "Additional Amounts
and Redemption for Taxation Reasons" and (b) at the option of the Company, on or
after June 1, 1999, at the redemption prices set forth herein, plus accrued
interest to the redemption date.
Additional Amounts and Redemption for Taxation Reasons
The Company will pay Additional Amounts (as defined under "Description of
Notes-Payment of Additional Amounts"), subject to certain exceptions, in order
that the non-U.S. Holders of Registered Notes receive the full amount of the
principal, premium, if any, and interest specified therein (including any amount
payable upon a repurchase of the Notes as described below under "Repurchase at
Option of Holders Upon Change in Control") without deduction for or on account
of U.S. withholding taxes. In the event that the Company must pay such
Additional Amounts, the affected Notes will be redeemable at the option of the
Company, as a whole but not in part, at 100% of the principal amount thereof,
plus any accrued interest to the redemption date (but without reduction for U.S.
withholding taxes). If U.S. information reporting requirements are changed so
as to require disclosure of the nationality, residence or identity of the
beneficial owners of Bearer Notes or coupons, the Company is required to either
(a) redeem the Bearer Notes, as a whole but not in part, at 100% of the
principal amount thereof, plus accrued interest to the redemption date; or (b)
if such disclosure may be avoided by payment of a backup withholding tax or
similar charge, withhold and pay (subject to certain limited exceptions) any
additional amounts necessary to cause the holders of the Bearer Notes or coupons
to receive the full amount of the principal, premium, if any, and interest
specified therein when due. If the Company elects to pay additional amounts as
provided in clause (b) of the preceding sentence, so long as such additional
amounts continue to be payable, the Company may redeem the Bearer Notes, as a
whole but not in part, at 100% of the principal amount thereof, plus accrued
interest (including any Additional Amounts) to the redemption date.
Repurchase at Option of Holders Upon Change in Control
The Notes are repurchasable by the Company at the option of the holder
thereof upon a Change in Control (as defined under "Description of
Notes-Repurchase at Option of Holders Upon a Change in Control") at 100% of the
principal amount thereof, plus accrued interest to the repurchase date. The
repurchase price is payable in cash or, at the option of the Company, in USA
Waste Common Stock (valued at 95% of the average closing prices of the USA Waste
Common Stock for the five trading days ending on and including the third trading
day prior to the repurchase date).
Pursuant to the Merger and in accordance with the terms of the Indenture,
the Company offered to repurchase the Notes by delivering to the Holders a
Notice of Change of Control and Repurchase Right dated September 23, 1997 (the
"Notice"). Under the terms of such Notice, each Holder had a right to exercise
the repurchase option by delivering to the Trustee or the Paying Agent, by
October 23, 1997, an executed Election of Holder to Require Repurchase together
the Notes with respect to which the repurchase right is being exercised.
Holders may elect to require the Company to repurchase a Note in full, or to
repurchase a portion of such Note, in accordance with the repurchase provisions
of the Indenture. Pursuant to the Notice, the date of repurchase of Notes
designated for repurchase was November 7, 1997. See "Description of Notes -
Repurchase at Option of Holders Upon a Change of Control."
Subordination
The Notes are subordinated to all present and future Senior Indebtedness
(as defined under "Description of Notes-Subordination") of the Company. The
Notes are also effectively subordinated in right of payment to all indebtedness
and other liabilities of the subsidiaries of the Company. As of September 30,
1997, the aggregate amount of outstanding Senior Indebtedness of the Company was
approximately $39.1 million. As of September 30, 1997, subsidiaries of the
Company had approximately $16.5 million of indebtedness outstanding (other than
indebtedness to the Company). The Indenture does not restrict the incurrence of
additional Senior Indebtedness or other indebtedness by the Company or any of
its subsidiaries.
Events of Default
Events of Default include: (a) failure to pay principal of or premium, if
any, on any Note when due, whether or not such payment is prohibited by the
subordination provisions of the Indenture; (b) failure to pay any interest on
any Note or coupon when due, continuing for 30 days, whether or not such payment
is prohibited by the subordination provisions of the Indenture; (c) failure to
perform, or the breach of, any other covenant of the Company in the Indenture,
continuing for 60 days after written notice as provided in the Indenture; (d)
default by the Company in respect of any indebtedness for money borrowed in
excess of $10,000,000, which default constitutes a failure to pay such
indebtedness at maturity or results in acceleration of such indebtedness, if
such indebtedness is not discharged, or such acceleration is not rescinded or
annulled, within 30 days after written notice as provided in the Indenture; and
(e) certain events of bankruptcy, insolvency or reorganization.
Registration Rights
The Company has filed the Registration Statement of which this Prospectus
forms a part pursuant to a Registration Rights Agreement (as defined under
"Description of Registration Rights Agreement"). Upon certain failures by the
Company to comply with certain of its obligations under the Registration Rights
Agreement, additional interest will be payable on the Registered Notes.
Indenture
The Notes have been issued pursuant to an Indenture dated as of June 5,
1996, between the Company and the Trustee, as supplemented and amended by a
Supplemental Indenture, dated as of August 26, 1997, between the Company, USA
Waste and the Trustee. The Indenture, the Supplemental Indenture and the Notes
are governed by the laws of the State of New York, United States of America.
LISTING
Notes
The Notes originally issued in transactions complying with Rule 144A were
designated for trading on the PORTAL System of the National Association of
Securities Dealers, Inc. (the "PORTAL System"). The Company has not applied,
and does not intend to apply, for listing of the Notes on any securities
exchange or for inclusion of the Notes on any automated quotation system.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes by the
Selling Security Holders.
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the securities offered hereby.
Risk Associated with Merger
Pursuant to the Merger, the Company became, and will continue to operate
as, a wholly-owned subsidiary of USA Waste. There can be no assurance that the
expected benefits of the Merger relative to the combined business will be
achieved. Whether the anticipated benefits of the Merger are ultimately
achieved will depend upon a number of factors, including the ability of the
combined company to achieve administrative cost savings, geographic and other
efficiencies resulting from access to more landfills, insurance and bonding cost
reductions, lower cost of capital and general economies of scale, and the
ability of the combined company to retain municipal contracts and generally to
capitalize on its combined asset base and strategic position.
Extensive Environmental and Land Use Laws and Regulations
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 as set forth
below. See "Description of Business -- Environmental Regulations" for further
information concerning the matters set forth below.
Extensive Permitting Requirements. In order to develop and operate a
landfill or other solid waste management facility, it is necessary for the
Company to obtain and maintain in effect various facility permits and other
governmental approvals, including those related to zoning, environmental and
land use. The Company may also be required to obtain other or similar permits
and approvals to expand its existing landfill operations and other solid waste
management operations. These permits and approvals are difficult, time
consuming and costly to obtain and may be subject to community opposition,
opposition by various local elected officials or citizens, regulatory delays and
other uncertainties. In addition, after an operating permit for a landfill or
other facility is obtained, the permit may be subject to modification, renewal
or revocation by the issuing agency, which may reopen opportunities for
opposition relating to the permit. Moreover, from time to time, regulatory
agencies may impose moratoria on, or otherwise delay, the review or grant of
these permits or approvals or they may modify the procedures or increase the
stringency of the standards applicable to such review or the 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 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 significant to its business
could adversely affect the Company's business and financial condition. See
"-Capitalized Expenditures".
Design, Operation and Closure Requirements. The design, operation and
closure of landfills are subject to extensive regulations. These regulations
include, among others, the regulations (the "Subtitle D Regulations")
establishing minimum federal requirements adopted by the United States
Environmental Protection Agency (the "EPA") in October 1991 under Subtitle D of
the Resource Conservation and Recovery Act of 1976 ("RCRA"), which regulations
generally became effective on October 9, 1993 (except for certain municipal
solid waste landfills accepting less than 100 tons per day, as to which the
effective date was April 9, 1994, and new financial assurance requirements,
which became effective April 9, 1997). The Subtitle D Regulations require all
states to adopt regulations regarding landfill design, operation and closure
requirements that are as stringent as, or more stringent than, the Subtitle D
Regulations. All states in which the Company operates landfills have in place
extensive landfill regulations which have been updated or replaced with new
regulations at least as stringent as the Subtitle D requirements. These federal
and state regulations include, among other things, requirements that the Company
monitor groundwater, control leachate and air emissions, post financial
assurances, and fulfill landfill closure and post-closure obligations. These
regulations could also require the Company to undertake investigatory or
remedial activities, to curtail operations or to close a landfill temporarily or
permanently. Furthermore, future changes in these regulations may require the
Company to modify, supplement, or replace equipment or facilities at costs which
could be substantial.
Legal and Administrative Proceedings. In the ordinary course of its
business, the Company may become involved in a variety of legal and
administrative proceedings relating to land use and environmental laws and
regulations. These may include proceedings by federal, state or local agencies
seeking to impose civil or criminal penalties on the Company for violations of
such laws and regulations, or to impose liability on the Company under RCRA,
Superfund (as discussed below) or comparable state statutes, or to revoke, or
deny renewal of, a permit; actions brought by citizens' groups, adjacent
landowners or governmental entities opposing the issuance of a permit or
approval to the Company or alleging violations of the permits pursuant to which
the Company operates or laws or regulations to which the Company is subject; and
actions seeking to impose liability on the Company for any environmental damage
at its owned or operated facilities (or at facilities formerly owned by the
Company or its predecessors) or damage that those facilities or other properties
may have caused to adjacent landowners or others, including groundwater or soil
contamination. These may arise out of the presence of hazardous substances in
landfills, methane or odor emissions or other conditions. The Company could
incur substantial legal expenses during the course of the aforementioned
proceedings, and the adverse outcome of one or more of these proceedings could
adversely affect the Company's business and financial condition.
During the ordinary course of its operations, the Company has from time to
time received, and expects that it may in the future from time to time receive,
citations or notices from governmental authorities that its operations are not
in compliance with its permits or certain applicable environmental or land use
laws and regulations. The Company generally seeks to work with the authorities
to resolve the issues raised by such citations or notices. There can be no
assurance, however, that the Company will always be successful in this regard,
and the failure to resolve a significant issue could result in one or more of
the adverse consequences to the Company described below under "--Potential
Liabilities".
Potential Liabilities. There may be various adverse consequences to the
Company in the event that a facility owned or operated by the Company (or by a
predecessor owner or operator whose liabilities the Company may have acquired
expressly or under successor or other liability theories) causes environmental
damage, in the event that waste transported by the Company (or a predecessor)
causes or threatens to cause environmental damage at another site, or in the
event that the Company (or a predecessor) fails to comply with applicable
environmental and land use laws and regulations or the terms of a permit or
outstanding administrative or consent order. These may include the imposition
of substantial monetary penalties on the Company; the issuance of orders
requiring the curtailment or termination of the operations involved or affected;
the revocation, denial or deferral of review of permits or other approvals
necessary for continued operation or landfill expansion; the imposition of
liability on the Company in respect of any environmental damage (including
groundwater or soil contamination) at its facilities or that its landfills or
other Company owned or operated facilities caused to adjacent landowners or
others or to natural resources or environmental damage at another site
associated with waste transported by the Company; the imposition of liability on
the Company under Superfund or under comparable state laws; and criminal
liability for the Company or its officers. Any of the foregoing could adversely
affect the Company's business and financial condition.
The Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 ("Superfund") and analogous state laws impose retroactive strict joint
and several liability on various parties that have owned, operated or sent waste
to a site from which there has been, or is threatened, a release of any
hazardous substance (as defined by Superfund) into the environment. Liability
under RCRA, Superfund and analogous state laws may include responsibility for
costs of site investigations, site cleanup, natural resources damages and
property damages. Liabilities under RCRA, Superfund and analogous state laws
can be very substantial and, if imposed upon the Company, could adversely affect
the Company's business and financial condition.
In the ordinary course of its landfill and waste management and disposal
operations and in connection with its review of landfills and other operations
to be acquired, the Company has discovered, and may in the future discover,
indications of groundwater contamination at certain landfills. In such events,
the Company has sought or been required to determine the magnitude and source of
the problem and, if appropriate or required by applicable regulations, to design
and implement measures to monitor, remedy, and/or halt the spread of, the
contamination. There can be no assurance, however, that contamination
discovered at a landfill or other solid waste management facilities will not
result in one or more of the adverse consequences to the Company described
above.
Type, Quantity and Source Limitations. 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 seek to 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, such 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 no such federal
legislation has to date been enacted, if such federal legislation should be
enacted in the future, 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 the Company's landfills within those states that receive
a significant portion of waste originating from other states.
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 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, if enacted, 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 full 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's results of operations
could be adversely affected.
Limits on Insurance Coverage
USA Waste currently carries all insurance on behalf of the Company. USA
Waste carries a broad range of insurance coverages, which its management
considers prudent for the protection of its assets and operations. Some of
these coverages are subject to varying retentions of risk by USA Waste. The
casualty coverages currently include $2,000,000 primary commercial general
liability and $1,000,000 primary automobile liability supported by $200,000,000
in umbrella insurance protection. The property policy provides insurance
coverage for all of USA Waste's real and personal property, including California
earthquake perils. USA Waste also carries $200,000,000 in aircraft liability
protection.
USA Waste maintains workers' compensation insurance in accordance with laws
of the various states and countries in which it has employees. USA Waste also
currently has an environmental impairment liability ("EIL") insurance policy for
certain of its landfills, transfer stations, and recycling facilities that
provide coverage for property damages and/or bodily injuries to third parties
caused by off-site pollution emanating from such landfills, transfer stations,
or recycling facilities. This policy provides $5,000,000 of coverage per
incident with a $10,000,000 aggregate limit.
To date, has not experienced any difficulty in obtaining insurance.
However, if USA Waste in the future is unable to obtain adequate insurance, or
decides to operate without insurance, a partially or completely uninsured claim
against USA Waste's financial condition, results of operations or cash flows.
Additionally, continued availability of casualty and EIL insurance with
sufficient limits at acceptable terms is an important aspect of obtaining
revenue-producing waste service contracts.
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.
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.
Financial Assurance Obligations
The Company is often 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 or closure of
landfills. If the Company were unable to obtain surety bonds or letters 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. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of Business -- Liability Insurance and Bonding".
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. These counties and municipalities may have financial
advantages due to the availability to them of tax revenues and tax exempt
financing. In addition, competitors may reduce the price of their services in
an effort to expand market share or to win competitively bid municipal
contracts.
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.
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 the regions where the Company
operates tends to decrease during the winter months.
Absence of Trading Market for the Notes
There is no existing public trading market for the Notes and there can be
no assurance as to the liquidity of any such market that may develop, the
ability of the holders of Notes to sell such securities, the price at which the
holders of Notes would be able to sell such securities or whether a trading
market, if it develops, will continue. If such a market were to exist, the
Notes could trade at prices higher or lower than their principal amount,
depending on many factors, including prevailing interest rates, the market for
similar securities and the operating results of the Company. The Company has
not applied and does not intend to apply for listing of the Notes on any
securities exchange or for inclusion of the Notes on any automated quotation
system.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes by the
Selling Security Holders.
RATIO OF EARNINGS TO FIXED CHARGES
The table below sets forth the ratio of earnings to fixed charges for the
Company for the periods indicated. For purposes of computing such ratio, (i)
earnings consist of income before income taxes plus fixed charges (other than
interest capitalized) and (ii) fixed charges consist of interest expense,
interest capitalized, amortization of debt issuance costs and discount and
premium, and the estimated interest portion of rental expense.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended
1992 1993 1994 1995 1996 June 30, 1997
<S> <C> <C> <C> <C> <C>
2.0 4.1 4.9 4.6 4.4 5.0
</TABLE>
SELECTED FINANCIAL DATA
The tables 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 "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
acquisitions 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 table 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>
<CAPTION>
UNITED WASTE SYSTEMS, INC.
Consolidated Five-year Summary of Selected Financial Data
(In thousands, except per share data)
Year ended December 31,
1992
1996 1995 1994 1993 (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
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)
1992
1996 1995 1994 1993 (Unaudited)(4)
Pro forma fully diluted
earnings (loss) per
common and common
equivalent share (3) $ .87 $ .77 $ .65 $ .48 $ (.14)
Cash dividends on common -- -- -- -- --
stock
</TABLE>
UNITED WASTE SYSTEMS, INC.
Consolidated Five-year Summary of Selected Financial Data - Cont'd
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992
1996 1995 1994 (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
(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.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1996
SIX MONTHS ENDED JUNE 30, 1997
The following discussion reviews the Company's operations for the six
months ended June 30, 1997 and the three years ended December 31, 1996 and
should be read in conjunction with the Company's Annual Consolidated Financial
Statements, Unaudited Condensed Consolidated Financial Statements and related
Notes thereto 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 "Forward-Looking Statements" and "Risk
Factors."
Introduction
The Company was formed in July 1989 to acquire and operate businesses in
the nonhazardous solid waste services industry and since its formation, through
June 30, 1997, has completed over 200 acquisitions, including 79 completed
during 1996 and 48 in the first six months of 1997. The focus of the Company's
acquisition program has been 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 acquisitions completed by the Company during the periods discussed
below include fifteen 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 and Note 2 of the
Notes to Unaudited Condensed 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.
<TABLE>
<CAPTION>
Year ended December 31, Six Months Ended June 30,
1996 1995 1994 1996 1997
<S> <C> <C> <C> <C> <C>
Landfill operations(1) 30% 31% 33% 29% 26%
Collection operations(2) 65 61 58 66 68
Waste reuse and reduction 2 5 4 2 3
programs(3)
Other services 3 3 5 3 3
Total 100% 100% 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 "Business - Operations - Waste Reuse and Reduction Programs" for a
description of the Company's waste reuse and reduction programs.
</TABLE>
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. As of the date of the Merger, the Company estimated that
the aggregate liability for the closure and post-closure costs of the facilities
that it owned at such time will be approximately $72.0 million. At June 30,
1997, reserves for landfill closure and post-closure costs (including reserves
assumed through acquisitions) were approximately $53.0 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
Six months ended June 30, 1997 and 1996
Revenues. Revenues for the first six months of 1997 were $216.6 million,
representing an increase of 43% over revenues for the first six months of 1996
of $151.8 million. Of this increase, approximately 34 percentage points were
due to the revenues attributable to (i) the businesses acquired by the Company
subsequent to June 30, 1996 and (ii) businesses that were acquired during the
first six months of 1996 and thus were included in the Company's results for the
first six months of 1996 for only a portion of the six month period and in the
Company's results for the first six months of 1997 for the full period. The
balance of this increase was due to an increase in 1997 in volume of waste
received by the Company's operations that were owned by the Company throughout
both periods (approximately 4.5 percentage points) and in prices charged for
services (approximately 4.5 percentage points).
Cost of Operations. As a percentage of revenues, cost of operations was
62.8% during the first six months of 1997 and 63.5% during the first six months
of 1996. The improvement in gross margin in 1997 primarily reflected (i) the
increase in revenues attributable to the fee and volume increases discussed
above, which were achieved without a corresponding increase in related costs,
and (ii) milder winter weather in the first quarter of 1997 than in the first
quarter of 1996. This improvement in gross margin was offset somewhat by the
increase in collection revenues as a percentage of total revenues, since
collection operations generally have lower margins than landfill operations.
Selling, General and Administrative Expense. Selling, general and
administrative expense ("SG&A") increased to $33.3 million during the first six
months of 1997 from $24.8 million during the first six months of 1996, but as a
percentage of revenues decreased to 15.4% during the first six months of 1997
from 16.3% during the first six months of 1996. The decrease in SG&A as a
percentage of revenues in 1997 primarily reflected the fact that, as the Company
completed acquisitions in 1996 and the first six months of 1997, its revenues
increased without a commensurate increase in senior management expense or
corporate overhead. Such decrease was partially offset by the fact that expenses
related to acquisitions accounted for as pooling-of-interests (of which there
were 11 in 1997 and one in 1996) were higher in the six months ended June 30,
1997 than in the six months ended June 30, 1996 (2.4% of revenues in 1997
compared with 1.4% of revenues in 1996).
Interest Expense. Interest expense increased to $7.9 million in the first
six months of 1997 from $7.2 million in the first six months of 1996. This
increase primarily reflected the fact that the Company's indebtedness increased
subsequent to the first six months of 1996 primarily as a result of the
completion of acquisitions. Interest capitalized as a component of construction
projects during the first six months of 1997 and 1996 amounted to approximately
$1.2 million and $0.6, respectively.
Other (Income) Expense, Net. Other income, net, was $1.6 million in the
six months ended June 30, 1997 compared with other expense, net, of $1.8 million
in the six months ended June 30, 1996. This increase in other income, net, was
primarily attributable to the $2.0 million charge in 1996 resulting from the
sale of the Company's transfer station in Pennsylvania and increased interest
income in 1997 as a result of higher cash balances in 1997.
Income Taxes. Income taxes increased to $17.0 million, or an effective
rate of 41.6%, during the first six months of 1997 from $8.7 million, or an
effective rate of 40.4% during the first six months of 1996. The increase in
the effective rate in 1997 compared with 1996 was primarily due to the fact that
the Company had certain transaction expenses in 1997 and 1996 relating to
acquisitions accounted for as pooling-of-interests that are not deductible in
determining taxable income and such expenses were higher in 1997 than in 1996.
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
Six Months ended June 30, 1997
The Company has used a substantial amount of cash generated from operations
to fund acquisitions, thereby reducing its current assets. In connection with
acquisitions and the financing of machinery and equipment, the Company has also
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 low levels of working capital or
working capital deficiencies.
During the six months ended June 30, 1997, the Company generated cash from
operations of approximately $50.5 million and had net cash from financing
activities of approximately $74.0 million. The Company used these funds
generated from operating and financing activities to complete business
acquisitions of approximately $73.9 million and for capital expenditures of
approximately $26.3 million. These acquisitions and capital expenditures
accounted for the increase in property and equipment, and intangible assets, at
June 30, 1997 compared with such amounts at December 31, 1996.
In March 1997, the Company completed a public offering in which it issued
3,450,000 shares of United Common Stock at a price of $36.50 per share. The net
proceeds to the Company from this offering were approximately $119 million. The
Company used approximately $47.2 million of such net proceeds to repay all
outstanding indebtedness under the Company's then existing $190 million, three
year, secured revolving credit facility (the "Credit Facility"). This offering
accounted for the increase in cash and cash equivalents and the decrease in
long-term debt, in each case at June 30, 1997 compared with December 31, 1996.
This offering was also the primary reason for the increase in stockholders
equity at June 30, 1997 compared with December 31, 1996.
Set forth 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 on hand and 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 the capital expenditures that
will be required in respect of the existing operations of the Company will be in
the range of $39 million to $44 million during the last six months of 1997 and
$65 to $70 million in 1998. The Company expects that it will fund such
estimated capital expenditures in respect of its existing operations from cash
on hand, cash generated from operations, and advances from USA Waste.
In order to minimize cash required to complete acquisitions and adequately
secure indemnity obligations, the Company frequently structured its landfill
acquisitions in a manner such that a portion of the purchase consideration was
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 on
hand, cash generated from operations and advances from USA Waste.
Debt Repayment. At June 30, 1997, the Company had debt and capital lease
obligations of approximately $280.9 million. The Company will be obligated to
retire approximately $1.8 million and $6.0 million of indebtedness during the
remainder of 1997 and in 1998, respectively. The Company plans to meet such
obligations from cash on hand, cash generated from operations and advances from
USA Waste.
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, as well as through surety bonds and irrevocable trust funds. As of June
30, 1997, the aggregate amount of these financial assurance obligations was
$48.8 million, $37.7 million of which was being satisfied by letters of credit
obtained under the Credit Facility. Pursuant to the Merger, letters of credit
obtained by USA Waste under its existing credit facility replaced the letters of
credit obtained by the Company to satisfy such financial assurance obligations.
Capital 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 in excess of the scheduled amortizations.
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 June 30, 1997 the Company's
unamortized financing costs amounted to approximately $6.3 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.
Three Years Ended December 31, 1996
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 United Common Stock warrants and options, (ii) the
issuance of United Common Stock as consideration for certain acquisitions and
(iii) net income in 1996.
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.
In June 1996, the Company issued $150 million principal amount of Notes.
The Notes bear interest at a fixed rate of 4-1/2% per annum, payable
semi-annually. Pursuant to the Supplemental Indenture executed in connection
with the Merger, the Notes are convertible into USA Waste Common Stock at a
conversion price of $30.23 per share. The Notes are unsecured obligations of
the Company and are subordinated to all existing and future Senior Indebtedness
(as defined in the Indenture) of the Company and are effectively subordinated to
all indebtedness and other liabilities of the subsidiaries of the Company.
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.
DESCRIPTION OF BUSINESS
The Company 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.
On August 26, 1997, a wholly-owned subsidiary of USA Waste was merged with
and into the Company. Pursuant to such Merger, the Company will continue to
operate as a wholly-owned subsidiary of USA Waste.
At the date of the Merger, the Company operated 39 nonhazardous landfill
operations (including 12 that it operated on behalf of municipalities), 80 waste
collection companies that had over 2,700 collection vehicles and trailers and
served over 900,000 customers, and 78 waste transfer stations (including seven
that it operated on behalf of municipalities).
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 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 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.
<TABLE>
<CAPTION>
Type of Operation Number Acquired
<S> <C>
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.
</TABLE>
Acquisitions Completed in Six Months ended June 30, 1997
The table below provides a summary description of completed acquisitions
(not including acquisitions that were accounted for as pooling-of-interests)
during the six months ended June 30, 1997:
<TABLE>
<CAPTION>
Type of Operation Number Acquired
<S> <C>
Landfill 2(1)
Collection companies 37(2)
Transfer stations 7(3)
(1) The landfills are located in Illinois and Nebraska.
(2) The collection companies (including 26 tuck-in acquisitions) are located in
Arizona, California, Illinois, Iowa, Kentucky, Maine, Massachusetts,
Minnesota, New Mexico, North Dakota, Pennsylvania, Rhode Island, Vermont,
and Wisconsin.
(3) The transfer stations are located in California, Kentucky, Minnesota and
Wisconsin.
</TABLE>
The above acquisitions have been accounted for as purchases and,
accordingly, the results of their operations have been included in the Company's
Condensed Consolidated Financial Statements from their respective acquisitions
dates.
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
At the time of the Merger with USA Waste, the Company operated 39 landfills
permitted to receive nonhazardous solid waste. These included 24 landfill
operations that the Company owned and 12 that it operated on behalf of
municipalities. These landfills 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.
At the time of the Merger, the Company owned and operated 24 landfill
operations which included 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.
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
At the time of the Merger, the Company provided solid waste collection
services to over 900,000 residential, commercial and industrial customers and,
in connection with providing these services, operated 78 transfer stations. As
of such date, these services were 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.
Employees
At the time of the Merger with USA Waste, the Company employed
approximately 4,100 employees. As of such date, two collective bargaining
agreements relating to three separate locations covered 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
became 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.
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 promulgated
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."
Properties
The principal fixed assets used by the Company in connection with its
landfill operations are its landfills which are described under "Business -
Operations - Landfills." The landfill operations 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).
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. Such settlement agreement was
approved by the Court in the second quarter of 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.
On April 17, 1997, a purported class action on behalf of the public
shareholders of the Company entitled Schipper v. United Waste et al., Civil
Action No. 15664-NC, was filed in the Court of Chancery of the State of Delaware
against the Company and each of the members of the Company's Board of Directors
asserting, among other things, that defendants breached their fiduciary duties
to stockholders of the Company in negotiating the Merger Agreement and in
engaging in certain related alleged acts and omissions. The complaint seeks,
among other things, injunctive and other equitable relief against consummation
of the Merger, and damages and costs in an unspecified amount. The Company
believes the claim is without merit.
On June 25, 1997, Richard and Martin Zielinski (the "Claimants") filed a
demand for arbitration against Connecticut Valley Sanitary Waste Disposal, Inc.
("CVSWD"), a subsidiary of United Waste. The Claimants seek approximately
$8,600,000, plus treble damages, based on CVSWD's alleged breaches of
obligations under a lease and Massachusetts law in relation to the operation of
CVSWD's Chicopee, Massachusetts Landfill. CVSWD disagrees with Claimants'
contentions and intends to vigorously defend against this claim. CVSWD will be
filing a counter-demand for arbitration, based on the Claimants' breaches of the
lease and Massachusetts law. It is too early to predict the outcome of the
arbitration.
DESCRIPTION OF NOTES
The Company issued an aggregate of $150,000,000 principal amount of Notes
on June 5, 1996. The Notes were issued under an Indenture dated as of June 5,
1996, between the Company and the Trustee, as amended and supplemented by a
Supplemental Indenture, dated as of August 26, 1997, between the Company, USA
Waste and the Trustee, copies of which are available for inspection at the
Corporate Trust Offices of the Trustee in the Borough of Manhattan, The City of
New York and in London, England. The Indenture and the Supplemental Indenture
are filed (through incorporation by reference) as exhibits to the Registration
Statement of which this Prospectus forms a part. References in this section to
the "Company" are solely to United Waste Systems, Inc. and not to its
subsidiaries and references to the "Indenture" are to the Indenture as
supplemented and amended by the Supplemental Indenture. Wherever particular
defined terms of the Indenture, (including the Notes and the various forms
thereof) are referred to, such defined terms are incorporated herein by
reference (the Notes being referred to in the Indenture as "Securities"). The
following summaries of certain provisions of the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the detailed provisions of the Notes and the Indenture, including the
definitions therein of certain terms. Parenthetical references to section
numbers within and following certain paragraphs in this Section are to
provisions of the Indenture.
General
The Notes are unsecured subordinated obligations of the Company and are
limited to $150,000,000 aggregate principal amount. The Notes mature on June 1,
2001, and payment in full of the principal amount of the Notes will be due on
such date. The Notes bear interest at a rate of 4 1/2% per annum from June 5,
1996, payable semiannually on June 1 and December 1 of each year (each, an
"Interest Payment Date"). Additional Interest may be payable on the Notes in
the amounts, and under the circumstances, described under "-Registration
Rights" and "Description of Registration Rights Agreement".
The Notes are convertible into USA Waste Common Stock at a conversion price
of $30.23 per share, subject to adjustment upon the occurrence of certain events
described below under "-Conversion Rights", at any time prior to the close of
business on the Maturity Date, unless previously redeemed or repurchased, in
which case, not after the close of business on the fifth Trading Day (as defined
below) prior to the date of redemption or the second Trading Day prior to the
date of repurchase. (Sections 2.2 and 12.1)
The Notes are redeemable (a) in the event of certain developments involving
U.S. taxes or certification requirements as described below under
"-Redemption-Redemption for Taxation Reasons", at a redemption price of 100% of
the principal amount of the Notes to be redeemed, plus accrued interest to the
redemption date and (b) at the option of the Company, on or after June 1, 1999,
in whole or in part, at the redemption prices set forth below under
"-Redemption-Optional Redemption", plus accrued interest to the redemption date.
"Trading Days" means (i) if the common stock is listed or admitted for trading
on any national securities exchange, days on which such national securities
exchange is open for business; (ii) if the common stock is quoted on the Nasdaq
National Market or any other system of automated dissemination of quotations of
securities prices, days on which trades may be effected through such system; or
(iii) if the common stock is not listed or admitted for trading on any national
securities exchange or quoted on the Nasdaq National Market or any other system
of automated dissemination of quotation of securities prices, days on which the
common stock is traded regular way in the over-the-counter market and for which
a closing bid and a closing asked price for the common stock are available.
(Sections 1.1, 2.2 and 15.1)
Form and Denomination
A portion of the outstanding Notes are in the form of registered Notes
without coupons ("Registered Notes")and a portion are in the form of bearer
notes with coupons attached("Bearer Notes"). The Registered Notes may be issued
in denominations of $1,000 and integral multiples of $1,000 in excess thereof.
Bearer Notes may be issued only in denominations of $5,000. Bearer Notes may be
exchanged for Registered Notes in authorized denominations as provided in the
Indenture. Registered Notes may not be exchanged for Bearer Notes. (Sections
1.1, 2.2, 3.2, 3.4 and 3.5) See "-Transfer and Exchange".
Registered Notes which are Restricted Securities (as defined in the
Indenture) are required to bear certain restrictive legends as provided in the
Indenture. Such legends provide for, among other things, certain restrictions
on transfer. Any Notes that are covered by this Prospectus and are transferred
by a Selling Security Holder pursuant to the Registration Statement of which
this Prospectus forms a part will cease to be a Restricted Security upon
completion of such transfer, provided that the prospectus delivery requirements
of the Securities Act are complied with and the Selling Security Holder delivers
a notice of sale to the Trustee substantially in the form of Exhibit A hereto.
The holder of a Registered Note may transfer such Note, subject to
compliance with the provisions of any restrictive legend required by the
Indenture, by surrendering such Note at (i) the office or agency maintained by
the Company for such purpose in the Borough of Manhattan, The City of New York,
which initially will be the office of the Trustee or (ii) the office of any
transfer agent appointed by the Company. (Sections 2.2, 2.6 and 3.5)
Certain of the outstanding Registered Notes are in the form of global notes
(the "Global Notes") that have been deposited with the Trustee as custodian for
The Depository Trust Company ("DTC")and registered in the name of a nominee of
DTC. AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Investors may hold their interests in a Global Note
directly through DTC, if they are participants in such system, or indirectly
through organizations which are participants in such system. All interests in a
Global Note, may be subject to the procedures and requirements of DTC. Without
limiting the foregoing, no beneficial owner of an interest in a Global Note
will be able to transfer that interest except in accordance with DTC's
applicable procedures (in addition to those under the Indenture).
Payments of the principal of, premium, if any, and interest on Global Notes
will be made to DTC or its nominee as the registered owner thereof. Neither the
Company, the Trustee nor any of their respective agents has any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interest.
DTC has advised the Company that it is a limited purpose trust company
organized under the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly. The Rules applicable to DTC
and its Participants are on file with the Commission.
Conversion Rights
The Holder of any Note has the right, at the Holder's option, to convert
any Bearer Note and to convert any portion of the principal amount of a
Registered Note that is an integral multiple of $1,000 (provided that the
unconverted portion of such Registered Note is an integral multiple of $1,000),
into shares of USA Waste Common Stock prior to the close of business on the
Maturity Date, unless previously redeemed or purchased, at a conversion price of
$30.23 per share (subject to adjustment as described below). The right to
convert a Note called for redemption or delivered for repurchase will terminate
at the close of business on the fifth Trading Day prior to the redemption date
for such Note or the second Trading Day preceding the repurchase date, as the
case may be. (Sections 2.2 and 12.1)
The right of conversion attaching to any Note may be exercised by the
Holder by delivering the Note to the specified office of a Conversion Agent
(which in the case of a Bearer Note will only be the office of any Conversion
Agent outside the United States; see "-Payment and Conversion"), accompanied by
a duly signed and completed notice of conversion, a copy of which may be
obtained from any Conversion Agent. The conversion date will be the date on
which the Note and the duly signed and completed notice of conversion are so
delivered. As promptly as practicable on or after the conversion date, the
Company will issue and deliver to the Trustee a certificate or certificates for
the number of full shares of USA Waste Common Stock issuable upon conversion,
together with payment in lieu of any fraction of a share; such certificate will
be sent by the Trustee to the Holder. Each Bearer Note surrendered for
conversion must be surrendered with all coupons maturing after the date of
conversion. Coupons maturing on or before the date of conversion and not in
default will be payable against surrender thereof, and coupons so maturing but
in default will continue to be payable, as set forth in the Indenture,
notwithstanding the exercise of the right of conversion by the Holder of the
Note to which the coupons appertain, but coupons maturing after the date of
conversion will not be paid. Any Registered Note surrendered for conversion
during the period from the close of business on any Regular Record Date (as
defined below) to the opening of business on the next succeeding Interest
Payment Date shall be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest payable
on such Interest Payment Date on the principal amount of such Registered Notes
being surrendered for conversion, except that if any Registered Note or portions
thereof has been called for redemption on a redemption date or is to be
repurchased on a repurchase date between a Regular Record Date and the
corresponding Interest Payment Date and, as a result, the right to convert such
Registered Note called for redemption would terminate during such period, then
the Holder of such Registered Note who converts such Registered Note or a
portion thereof will be entitled to receive the amount of interest so payable
and shall not be required to repay such interest upon surrender of such
Registered Note for conversion. In the case of any Registered Note which has
been converted after any Regular Record Date and on or prior to the next
Interest Payment Date, interest whose Stated Maturity is on such Interest
Payment Date shall be payable on such Interest Payment Date notwithstanding such
conversion, and such interest shall be paid to the Holder of such Registered
Note on such Regular Record Date. As a result of the foregoing provisions,
except as provided above, Holders that surrender Notes for conversion on a date
that is not an Interest Payment Date will not receive any interest for the
period from the Interest Payment Date next preceding the date of conversion to
the date of conversion or for any later period, even if the Notes are
surrendered after a notice of redemption (except for the payment of interest on
Registered Securities called for redemption on a redemption date or to be
repurchased on a repurchase date between a Regular Record Date and the Interest
Payment Date to which it relates). No other payment or adjustment for interest,
or for any dividends in respect of USA Waste Common Stock, will be made upon
conversion. Holders of USA Waste Common Stock issued upon conversion will not
be entitled to receive any dividends payable to holders of USA Waste Common
Stock as of any record time before the close of business on the conversion date.
No fractional shares will be issued upon conversion but, in lieu thereof, the
Company will calculate an appropriate amount to be paid in cash based on the
market price of USA Waste Common Stock at the close of business on the day of
conversion. "Regular Record Date" for interest payable in respect of any
Registered Note on any Interest Payment Date means May 15 or November 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. (Sections 1.1, 2.2, 3.7, 12.2 and 12.3)
With regard to a Holder delivering a Note for conversion, the Company will
pay any taxes or duties in respect of the issue or delivery of USA Waste Common
Stock on conversion, but the Company shall not be required to pay any tax or
duty which may be payable in respect of any transfer involved in the issue or
delivery of the USA Waste Common Stock in a name other than that of the Holder
of the Note. Certificates representing shares of USA Waste Common Stock will
not be issued or delivered unless and until the person requesting such issuance
has paid to the Company the amount of any such tax or duty or has established to
the satisfaction of the Company that such tax or duty has been paid. (Section
12.8)
The conversion price is subject to adjustment in certain events, including:
(a) dividends (and other distributions) payable in USA Waste Common Stock on
shares of capital stock of USA Waste, (b) the issuance to all holders of USA
Waste Common Stock of rights, options or warrants entitling them to subscribe
for or purchase USA Waste Common Stock at less than the then current market
price (determined as provided in the Indenture) of USA Waste Common Stock, (c)
subdivisions, combinations and reclassifications of USA Waste Common Stock, (d)
distributions to all holders of USA Waste Common Stock of evidences of
indebtedness of USA Waste, shares of capital stock, or property (including
securities, but excluding those dividends, rights, options, warrants and
distributions referred to above, dividends and distributions paid exclusively in
cash and distributions upon mergers or consolidations to which the next
succeeding paragraph applies), (e) distributions consisting exclusively of cash
(excluding any cash portion of distributions referred to in (d) above, or cash
distributed upon a merger or consolidation to which the next succeeding
paragraph applies) to all holders of USA Waste Common Stock in an aggregate
amount that, combined together with (i) the aggregate amount of any other such
all-cash distributions made within the preceding 12 months in respect of which
no adjustment has been made and (ii) the aggregate amount of any cash and the
fair market value of other consideration payable in respect of any tender offer
by USA Waste or any of its subsidiaries for USA Waste Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been made,
exceeds 12.5% of USA Waste's market capitalization (being the product of the
then current market price of the USA Waste Common Stock and the number of shares
of USA Waste Common Stock then outstanding) on the record date for such
distribution, and (f) the successful completion of a tender offer made by USA
Waste or any of its subsidiaries for USA Waste Common Stock which involves an
aggregate consideration that, together with (i) the aggregate of cash and other
consideration payable in a tender offer by USA Waste or any of its subsidiaries
for USA Waste Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (ii) the aggregate amount of any cash distributions to all holders of USA
Waste Common Stock within the 12 months preceding the expiration of such tender
offer in respect of which no adjustments have been made, exceeds 12.5% of USA
Waste's market capitalization on the expiration of such tender offer. The
Company may make such reductions in the conversion price in addition to those
required in the foregoing provisions as it considers to be advisable in order to
avoid or diminish any income tax to holders of USA Waste Common Stock resulting
from any dividend, distribution of stock or issuance or rights or warrants to
purchase or subscribe for stock or from any event treated as such for income tax
purposes. No adjustment of the conversion price will be required to be made
until the cumulative adjustments amount to 1.0% or more of the conversion price.
(Section 12.4) The Company shall compute any adjustments to the conversion
price pursuant to this paragraph and will give notice of any adjustments.
(Section 12.5) See "-Notices".
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the USA Waste Common Stock) or any sale or transfer of all or
substantially all of the assets of USA Waste, each Note then outstanding will,
without the consent of the Holder of any Note or coupon, become convertible only
into the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer by a holder of the number of shares
of USA Waste Common Stock into which such Note was convertible immediately prior
thereto (assuming such holder of USA Waste Common Stock failed to exercise any
rights of election and that such Note was then convertible). (Section 12.11)
If at any time USA Waste makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness or
assets of USA Waste, but generally not stock dividends on USA Waste Common Stock
or rights to subscribe for USA Waste Common Stock) and, pursuant to the
anti-dilution provisions of the Indenture, the number of shares of USA Waste
Common Stock into which Notes are convertible is increased, such increase may be
deemed for federal income tax purposes to be the payment of a taxable dividend
to Holders of Notes.
Subordination
The payment of the principal of, premium, if any, and interest on, the
Notes and coupons will be subordinated in right of payment to the extent set
forth in the Indenture to the prior payment in full of all Senior Indebtedness
of the Company. Senior Indebtedness means (a) the principal of (and premium, if
any) and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on the indebtedness
outstanding under the Company's Third Amended and Restated Credit Agreement,
dated as of August 16, 1995, and the Company's $75,000,000 principal amount of
7.67% Senior Secured Notes Due September 1, 2005, including any modifications,
refundings, deferrals, renewals, restatements or extensions of any such
indebtedness and all fees, charges, expenses, reimbursements and indemnification
obligations and other amounts payable thereunder, (b) all other indebtedness of
the Company (including indebtedness of others guaranteed by the Company) other
than the Notes, whether outstanding on the date of the Indenture or thereafter
created, incurred or assumed, which is (i) for money borrowed or (ii) evidenced
by a note or similar instrument given in connection with the acquisition of any
businesses, properties or assets of any kind, (c) obligations of the Company as
lessee under leases required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles, (d) obligations of the
Company under interest rate and currency swaps, caps, floors, collars or similar
agreements or arrangements intended to protect the Company against fluctuations
in interest or currency exchange rates and (e) renewals, extensions,
modifications, restatements and refundings of any such indebtedness or
obligation; provided, however, that Senior Indebtedness shall not include any
such indebtedness or obligation (w) if the terms of such indebtedness or
obligation (or the terms of the instrument under which, or pursuant to which, it
is issued) provides that such indebtedness or obligation is not superior in
right of payment to the Notes, (x) if such indebtedness or obligation is
non-recourse to the Company, (y) under any conditional sale contract or any
account payable or other indebtedness created or assumed by the Company in the
ordinary course of business in connection with the obtaining of inventories or
services or (z) if such indebtedness or obligation is unsecured. (Sections 1.1
and 13.1)
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will first be
entitled to receive payment in full of all amounts due or to become due thereon
before the holders of the Notes will be entitled to receive any payment in
respect of the principal of or premium, if any, or interest on the Notes.
(Section 13.2) In the event of the acceleration of the maturity of any Notes,
the holders of all Senior Indebtedness outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due or to become due thereon before the Holders of the Notes will be entitled to
receive any payment upon the principal of or premium, if any, or interest on the
Notes. (Section 13.3) No payments on account of principal, premium, if any, or
interest in respect of the Notes may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Indebtedness, or an
event of default with respect to any Senior Indebtedness permitting the holders
thereof to accelerate the maturity thereof, or if any judicial proceeding shall
be pending with respect to any such default. (Section 13.4) For purposes of the
subordination provisions, the payment, issuance or delivery of cash, property or
securities (other than "junior securities") upon conversion of a Note will be
deemed to constitute payment on account of the principal of such Note. (Section
13.15)
By reason of such subordination, in the event of insolvency, creditors of
the Company who are holders of Senior Indebtedness may recover more, ratably,
than the Holders of the Notes, and such subordination may result in a reduction
or elimination of payments to the Holders of the Notes.
In addition, the Notes will be structurally subordinated to all
indebtedness and other liabilities (including trade payables and lease
obligations) of the Company's subsidiaries, as any right of the Company to
receive any assets of its subsidiaries upon their liquidation or reorganization
(and the subsequent right of the Holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of that subsidiary's
creditors (including trade creditors), except to the extent that the Company
itself is recognized as a creditor of such subsidiary, in which case the claims
of the Company would still be subordinate to any security interest in the assets
of such subsidiary and any indebtedness of such subsidiary senior to that held
by the Company. As of September 30, 1997, the aggregate amount of outstanding
Senior Indebtedness of the Company was approximately $39.1 million. As of
September 30, 1997, subsidiaries of the Company had approximately $16.5 million
of indebtedness outstanding (other than indebtedness to the Company).
The Indenture does not limit the Company's ability to incur Senior
Indebtedness or any other indebtedness.
Redemption
Optional Redemption
Subject to the discussion under "-Redemption for Taxation Reasons" below,
the Notes may not be redeemed at the option of the Company prior to June 1,
1999. Thereafter, the Notes may be redeemed, in whole or in part, at the option
of the Company, at a redemption price equal to 101.8% of the principal amount
for the 12-month period beginning June 1, 1999 and 100.9% of the principal
amount for the 12-month period beginning June 1, 2000, in each case together
with accrued interest to the date of redemption, upon not less than 30 nor more
than 60 days' prior notice as provided under "-Notices" below. (Sections 2.2,
11.1, 11.5 and 11.7)
Redemption for Taxation Reasons
If the Company has or will become obligated to pay Additional Amounts (as
described below under "-Payment of Additional Amounts") as a result of any
change in, or amendment to, the laws (including any regulations or rulings
promulgated thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or any change in, or
amendment to, the application or official interpretation of such laws,
regulations or rulings (any such change or amendment being herein referred to as
a "Tax Law Change"), and such obligation cannot be avoided by the Company taking
reasonable measures available to it, any Notes as to which such Additional
Amounts have or will become payable may be redeemed, at the option of the
Company, in whole but not in part. Such redemption shall be upon not less than
30 nor more than 60 days' prior notice as provided under "-Notices" below, at a
redemption price equal to 100% of the principal amount of the Notes to be
redeemed, plus accrued interest to the redemption date and any Additional
Amounts then payable; provided, that (1) no such notice of redemption shall be
given earlier than 90 days prior to the earliest date on which the Company would
be obligated to pay any such Additional Amounts were a payment in respect of the
Notes then due and (2) at the time such notice of redemption is given, such
obligation to pay such Additional Amounts remains in effect. Prior to the
publication of any notice of redemption pursuant to this paragraph, the Company
shall deliver to the Trustee (a) an officer's certificate stating that the
Company is entitled to effect such redemption and setting forth a statement of
facts showing that the conditions precedent to the right of the Company so to
redeem have occurred and (b) an opinion of counsel selected by the Company,
which counsel shall be reasonably acceptable to the Trustee, to the effect that
the Company has or will become obligated to pay such Additional Amounts as a
result of a Tax Law Change. The Company's right to redeem the Notes shall
continue as long as the Company is obligated to pay such Additional Amounts,
notwithstanding that the Company shall have theretofore made payments of
Additional Amounts. (Sections 1.1, 2.2, 11.1 and 11.3)
In addition, if the Company determines, based upon an opinion of counsel
selected by the Company, which counsel shall be reasonably acceptable to the
Trustee, that, as a result of a Tax Law Change, any payment made outside the
United States by the Company or any of its Paying Agents of the full amount of
principal, premium, if any, or interest due with respect to any Bearer Note or
coupon appertaining thereto would be subject to any certification,
identification or other information reporting requirement of any kind, the
effect of which requirement is the disclosure to the Company, any Paying Agent
or any governmental authority of the nationality, residence or identity of a
beneficial owner of such Bearer Note or coupon who is not a U.S. person as
defined below under "-Payment of Additional Amounts" (other than such a
requirement (a) which would not be applicable to a payment made by the Company
or any one of its Paying Agents (i) directly to the beneficial owner or (ii) to
any custodian, nominee or other agent of the beneficial owner, (b) which can be
satisfied by the custodian, nominee or other agent certifying that the
beneficial owner is not a U.S. person, provided that, in each case referred to
in clauses (a) (ii) and (b), payment by such custodian, nominee or agent to such
beneficial owner is not otherwise subject to any such requirement, or (c) which
would not be applicable but for the fact that such Bearer Note constitutes a
"United States real property interest" as defined in Section 897(c)(1) of the
Code, with respect to the beneficial owner of such Bearer Note), the Company at
its election will either (x) redeem the Bearer Notes, as a whole but not in
part, at a redemption price equal to 100% of the principal amount thereof, plus
accrued interest to the redemption date, or (y) if and so long as the conditions
of the third paragraph under "-Payment of Additional Amounts" are satisfied, pay
the additional amounts specified in such paragraph. The Company will make such
determination and election and notify the Trustee thereof in writing as soon as
practicable, and the Trustee will promptly give notice of such determination
(the "Determination Notice"), in each case stating the effective date of such
certification, identification or information reporting requirement, whether the
Company will redeem the Bearer Notes or will pay the additional amounts
specified in the third paragraph under "-Payment of Additional Amounts" and (if
applicable) the last date by which the redemption of the Bearer Notes shall take
place. If the Company shall elect to redeem the Bearer Notes pursuant to clause
(x) above, such redemption shall take place on such date, not later than one
year after publication of the Determination Notice, as the Company shall elect
by notice given in writing to the Trustee, at least 75 days before that date,
unless shorter notice shall be acceptable to the Trustee. Notwithstanding the
foregoing, the Company will not so redeem the Bearer Notes if the Company, based
upon an opinion of counsel selected by the Company, which counsel shall be
reasonably acceptable to the Trustee, subsequently determines, not less than 30
days prior to the Redemption Date, that subsequent payments would not be subject
to any such requirement, in which case the Company will notify the Trustee in
writing of its determination not to so redeem the Bearer Notes, and the Trustee
will promptly give notice to the Holders of the Bearer Notes of that
determination and any earlier redemption notice will thereupon be revoked and of
no further effect. If the Company elects as provided in clause (y) above to pay
additional amounts, the Company may, as long as the Company is obligated to pay
such additional amounts, redeem all the Bearer Notes, at any time, as a whole
but not in part, upon not less than 30 nor more than 60 days notice prior to the
redemption date, at a redemption price equal to 100% of the principal amount
thereof plus accrued interest to the redemption date and any additional amounts
then payable. (Sections 2.2 and 11.3)
Payment and Conversion
Bearer Notes and coupons will be payable in U.S. dollars against surrender
thereof, subject to any applicable laws and regulations, at such offices or
agencies outside the United States as the Company may appoint from time to time.
The Company has appointed the Corporate Trust Office of the Trustee in London,
England as such an office. At the option of the Holder, such payment will be
made by dollar check drawn on a bank in the Borough of Manhattan, The City of
New York or by transfer of U.S. dollars to an account (such a transfer to be
made only to a Holder of an aggregate principal amount of Notes in excess of
$2,000,000) maintained by the payee with a bank outside the United States. No
payment with respect to any Bearer Note or coupon will be made at the Corporate
Trust Office of the Trustee in the Borough of Manhattan, The City of New York,
or any office or agency of the Company in the United States, or by transfer to
an account, maintained with a bank located in the United States or by check
mailed to any address in the United States. Notwithstanding the foregoing,
payments with respect to Bearer Notes and coupons may be made at the office of
the Trustee or other Paying Agent, if one is appointed, in the Borough of
Manhattan, The City of New York, if payment at all offices maintained outside
the United States for such purpose by the Company is illegal or effectively
precluded by exchange controls or other similar restrictions on the full payment
or receipt of such amounts in U.S. dollars, as determined by the Company.
(Section 2.2)
The principal of the Registered Notes will be payable in U.S. dollars,
against surrender thereof at the Corporate Trust Office of the Trustee or at
such other office or agency of the Company as may be designated by it for such
purpose in the Borough of Manhattan, The City of New York, in U.S. currency by
U.S. dollar check drawn on, or by transfer to a U.S. dollar account (such a
transfer to be made only to a Holder of an aggregate principal amount of
Registered Notes in excess of $2,000,000 and only if such Holder shall have
furnished wire instructions in writing to the Trustee no later than 15 days
prior to the relevant payment date) maintained by the Holder with a bank in the
Borough of Manhattan, The City of New York. Registered Notes will bear interest
at a rate of 4 1/2% per annum from June 5, 1996 or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable
semi-annually on June 1 and December 1 of each year, commencing December 1,
1996, to the Person in whose name the Registered Note (or any predecessor
Registered Note) is registered at the close of business on the preceding May 15
or November 15, as the case may be. Payment of interest on a Registered Note
may be made by U.S. dollar check drawn on a bank in the Borough of Manhattan,
The City of New York, mailed to the address of the person entitled thereto as
such address shall appear in the Security Register, or, upon written application
by the Holder to the Security Registrar setting forth instructions not later
than the relevant Record Date, by transfer to a U.S. dollar account (such a
transfer to be made only to a Holder of an aggregate principal amount of
Registered Notes in excess of $2,000,000) maintained by the Holder with a bank
in the Borough of Manhattan, The City of New York. No transfer to a dollar
account will be made unless the Trustee has received written wire instructions
not less than 15 days prior to the relevant payment date. (Section 2.2)
Any payment on the Notes due on any day which is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date. "Business
Day", when used with respect to any place of payment, place of conversion or any
other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in such place of
payment, place of conversion or other place, as the case may be, are authorized
or obligated by law or executive order to close. (Sections 1.1 and 2.2)
Notes may be surrendered for conversion, subject to any applicable laws and
regulations, at the office of any Conversion Agent outside the United States.
In addition, Registered Notes may be surrendered for conversion at the Corporate
Trust Office of the Trustee in the Borough of Manhattan, The City of New York.
Notes surrendered for conversion must be accompanied by appropriate notices, any
unmatured coupons and any payments in respect of interest or taxes, as
applicable, as described above under "-Conversion Rights". (Sections 2.2 and
12.2)
The Company has initially appointed the Trustee as Paying Agent and
Conversion Agent at its Corporate Trust Office (i) in the Borough of Manhattan,
The City of New York (Bankers Trust Company, Corporate Trust & Agency Group,
Four Albany Street, New York, NY 10006), and (ii) in London, England (Bankers
Trust Company, 1 Appold Street, Broadgate, London EC2A 2HE). The Company may at
any time terminate the appointment of any Paying Agent or Conversion Agent and
appoint additional or other Paying Agents and Conversion Agents, provided that
until the Notes have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal of, premium, if any, and interest on the Notes
have been made available for payment and either paid or returned to the Company
as provided in the Indenture, it will maintain an office or agency in the
Borough of Manhattan, The City of New York for surrender of Notes for
conversion, and in a Western European city for payments with respect to the
Notes and for the surrender of Notes for conversion. Notice of any such
termination or appointment and of any change in the office through which any
Paying Agent or Conversion Agent will act will be given in accordance with
"-Notices" below. (Section 10.2)
Bearer Notes should be presented for payment upon redemption or repurchase
together with all unmatured coupons, failing which the amount of any missing
unmatured coupons will be deducted from the sum due for payment or the surrender
of such missing coupons or coupon may be waived by the Company and the Trustee
or the Paying Agent if there be furnished to them such security or indemnity as
they may require to save each of them and any Paying Agent harmless. Each
amount so deducted will be paid in the manner described in the first paragraph
under this heading against surrender of the related missing coupon. Interest
payable on any Bearer Notes on any redemption date or repurchase date which is
an Interest Payment Date will be paid to the Holders of the coupons maturing on
such Interest Payment Date. Interest payable on Registered Notes on any
redemption date or repurchase date that is an Interest Payment Date will be paid
to the Holders of record as of the immediately preceding Regular Record Date.
(Sections 11.7 and 14.2)
All moneys deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of principal of, premium, if any, or
interest on any Notes, which remain unclaimed at the end of two years after such
payment has become due and payable will be paid to the Company, and the Holder
of such Note or any coupon appertaining thereto will thereafter, as an unsecured
general creditor, look only to the Company for payment thereof. (Section 10.3)
Payment of Additional Amounts
The Company will pay to the Holder of any Note or any coupon appertaining
thereto who is not a U.S. person such additional amounts ("Additional Amounts")
as may be necessary in order that every net payment of the principal of,
premium, if any, and interest on such Note (including any payment on redemption
or repurchase), after deduction or withholding for or on account of any present
or future tax, assessment or governmental charge imposed upon or as a result of
such payment by the United States or any political subdivision or taxing
authority thereof or therein, will not be less than the amount provided for in
such Note or in such coupon to be then due and payable; provided, however, that
the foregoing obligation to pay Additional Amounts will not apply to:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member, shareholder of or possessor of a power over such
Holder, if such Holder is an estate, a trust, a partnership or a
corporation) and the United States or any political subdivision or taxing
authority thereof or therein, including, without limitation, such Holder
(or such fiduciary, settlor, beneficiary, member, shareholder or possessor)
being or having been a citizen or resident of the United States or treated
as a resident thereof, or being or having been engaged in trade or business
or present therein, or having or having had a permanent establishment
therein, or (ii) such Holder's present or former status as a personal
holding company, a foreign personal holding company with respect to the
United States, a controlled foreign corporation, a passive foreign
investment company, or a foreign private foundation or foreign tax-exempt
entity for United States tax purposes, or a corporation which accumulates
earnings to avoid United States federal income tax;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Holder of such Notes
or any coupon appertaining thereto for payment on a date more than 15 days
after the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with any certification,
identification or other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the Holder or
beneficial owner of such Note or any coupon appertaining thereto, if
compliance is required by statute or by regulation or ruling of the United
States Treasury Department as a precondition to exemption from such tax,
assessment or other governmental charge;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of,
premium, if any, or interest on such Note;
(f) any tax, assessment or other governmental charge imposed as a
result of a person's past or present actual or constructive ownership,
including by virtue of the right to convert Notes, of 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote;
(g) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of the principal of, premium,
if any, or interest on such Note, if such payment can be made without such
withholding by any other Paying Agent in Western Europe;
(h) any tax, assessment or other governmental charge imposed on a
Holder that is a partnership or a fiduciary, but only to the extent that
any beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the payment
of Additional Amounts had the beneficial owner, member, beneficiary or
settlor directly received its beneficial or distributive share of payments
on the Note;
(i) any tax, assessment or other governmental charge which would not
have been imposed but for the fact that such Note constitutes a "United
States real property interest" as defined in Section 897(c)(1) of the Code
and the regulations thereunder with respect to the beneficial owner of such
Note (see "United States Taxation-Non-United States Holders United States
Foreign Investment in Real Property Tax Act"); or
(j) any combination of items (a), (b), (c), (d), (e), (f), (g), (h)
and (i). (Section 2.2)
For purposes of this Prospectus, "United States" means the United States of
America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction. A "U.S. person" is
a person that is, for United States federal income tax purposes, (a) a citizen
or resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States, or of any
political subdivision thereof or (c) an estate or trust the income of which is
subject to United States federal income taxation regardless of source. Solely
for purposes of the foregoing definition of "U.S. person", the term "United
States" shall include, when used in the geographical sense, only the States
thereof and the District of Columbia. (Section 2.2)
Notwithstanding the foregoing, if and so long as a certification,
identification or other information reporting requirement referred to in the
second paragraph under "-Redemption-Redemption for Taxation Reasons" above
would be fully satisfied by payment of a backup withholding tax or similar
charge, the Company may elect, by so stating in the Determination Notice, to
have the provisions of this paragraph apply in lieu of redeeming the Bearer
Notes pursuant to such second paragraph. In such event, the Company will pay as
additional amounts such amounts as may be necessary so that every net payment
made, following the effective date of such requirements, outside the United
States by the Company or any Paying Agent of principal of, and premium, if any,
due in respect of any Bearer Note, or interest represented by any coupon, the
beneficial owner of which is not a U.S. person (but without any requirement that
the nationality, residence or identity of such beneficial owner be disclosed to
the Company, any Paying Agent or any governmental authority), after deduction or
withholding for or on account of such backup withholding tax or similar charge,
other than a backup withholding tax or similar charge which is (a) the result of
a certification, identification or information reporting requirement described
in the first parenthetical clause of the first sentence of such second
paragraph, (b) imposed as a result of the fact that the Company or any Paying
Agent has actual knowledge that the beneficial owner of such Bearer Note or
coupon is within the category of persons described in clause (a) of the first
paragraph under this heading or (c) imposed as a result of presentation of such
Bearer Note or coupon for payment more than 15 days after the date on which such
payment becomes due and payable or on which payment thereof is duly provided
for, whichever occurs later, will not be less than the amount provided for in
such Bearer Note or coupon to be then due and payable. (Section 2.2)
Repurchase at Option of Holders Upon a Change in Control
If a Change in Control (as defined below) occurs, each Holder of Notes
shall have the right, at the Holder's option, to require the Company to
repurchase all of such Holder's Notes, or any portion of the principal amount
thereof that is equal to $5,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at a price equal to 100% of the principal
amount of the Notes to be repurchased (the "Repurchase Price"), together with
interest accrued to the Repurchase Date. A Holder of Bearer Notes may exercise
the repurchase option only by delivery of the Notes to an office of a Paying
Agent outside the United States. (Sections 2.2 and 14.1)
The Company may, at its option, in lieu of paying the Repurchase Price in
cash, pay the Repurchase Price in USA Waste Common Stock valued at 95% of the
average of the closing prices per share of the common stock for the five
consecutive Trading Days ending on and including the third Trading Day preceding
the Repurchase Date; provided, that payment may not be made in common stock
unless such stock is listed on a national securities exchange or traded on the
Nasdaq National Market at the time of payment. (Sections 2.2 and 14.1)
On or before the 30th day after the occurrence of a Change in Control, the
Company will give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Change in Control
and of the repurchase right arising as a result thereof. The Company Notice
shall be given in accordance with "-Notices" below. To exercise the repurchase
right, a Holder of Notes must deliver to the Trustee or any Paying Agent on or
before the 30th day after the date of the Company Notice irrevocable written
notice of the Holder's exercise of such right, together with the Notes and, in
the case of Bearer Notes, any coupons maturing after the repurchase date, with
respect to which the right is being exercised. At least two Trading Days prior
to the Repurchase Date, the Company must publish a notice in the manner
described above specifying whether the Company will pay the Repurchase Price in
cash or in USA Waste Common Stock. (Section 14.2)
A "Change in Control" shall be deemed to have occurred at such time, after
the original issuance of the Notes, of:
(i) the acquisition by any Person of beneficial ownership, directly
or indirectly, through a purchase, merger or other acquisition transaction
or series of transactions, of shares of capital stock of the Company
entitling such Person to exercise 50% or more of the total voting power of
all shares of capital stock of the Company entitled to vote generally in
elections of directors (any shares of voting stock of which such Person is
the beneficial owner, as defined below, that are not then outstanding being
deemed outstanding for purposes of calculating such percentage); or
(ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another person into the
Company, or any sale or transfer of all or substantially all of the assets
of the Company to another Person (other than a merger (x) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock of the Company or (y) which is effected
solely to change the jurisdiction of incorporation of the Company and
results in a reclassification, conversion or exchange of outstanding shares
of USA Waste Common Stock into solely shares of common stock);
provided, however, that a Change in Control shall not be deemed to have occurred
if either (a) the closing price per share of United Common Stock for any five
Trading Days within the period of 10 consecutive Trading Days ending immediately
after the later of the Change in Control or the public announcement of the
Change in Control (in the case of a Change in Control under clause (i) above) or
the 10 consecutive Trading Days ending immediately prior to the date of the
Change in Control (in the case of a Change in Control under clause (ii) above)
shall equal or exceed 105% of the conversion price of the Notes in effect on
each such Trading Day, or (b) all the consideration (excluding cash payments for
fractional shares) to be paid for United Stock in the transaction or
transactions constituting the Change in Control consists of shares of common
stock traded on a national securities exchange or quoted on the Nasdaq National
Market and as a result of such transaction or transactions the Notes become
convertible solely into such common stock. "Beneficial owner" shall be
determined in accordance with Rule 13d-3 promulgated by the Commission under the
Exchange Act, and the term "Person" shall include any syndicate or group deemed
to be a "person" under Section 13(d)(3) of the Exchange Act. (Section 14.3)
Failure by the Company to repurchase the Notes when required would result
in an Event of Default with respect to the Notes whether or not such repurchase
is permitted by the subordination provisions. See "-Events of Default".
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders.
Pursuant to the Merger and in accordance with the terms of the Indenture,
the Company offered to repurchase the Notes by delivering to the Holders a
Notice of Change of Control and Repurchase Right dated September 23, 1997 (the
"Notice"). Under the terms of such Notice, each Holder may exercise the
repurchase option by delivering to the Trustee or the Paying Agent, by October
23, 1997, an executed Election of Holder to Require Repurchase together with the
Notes with respect to which the repurchase right is being exercised. Holders
may elect to require the Company to repurchase a Note in full, or to repurchase
a portion of such Note, in accordance with the repurchase provisions of the
Indenture. Pursuant to the Notice, the date of repurchase of Notes designated
for repurchase was November 7, 1997.
Mergers and Sales of Assets by the Company
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease all its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease all or
substantially all of its properties and assets to the Company unless (a) in the
case the Company shall consolidate with or merge into another Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, the Person formed by such consolidation or into which the Company is
merged or the Person to which the properties and assets of the Company are so
conveyed, transferred or leased shall be a corporation, partnership or trust
organized and validly existing under the laws of the United States, any State
thereof or the District of Columbia and shall expressly assume the payment of
the principal of, premium, if any, and interest on the Notes and coupons and the
performance or observance of every other covenant of the Company under the
Indenture, (b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing, and (c) the Company
has delivered to the Trustee an officer's certificate and an opinion of counsel,
each stating that such consolidation, merger, conveyance, transfer or lease and
supplemental indenture (if required) comply with, among other things, the
requirements set forth in this paragraph. (Section 7.1)
On August 26, 1997, a wholly-owned subsidiary of USA Waste was merged with
and into the Company, and the Company became a wholly-owned subsidiary of USA
Waste. Prior to such Merger and pursuant to Section 10.13 of the Indenture, the
Holders of a majority of the outstanding principal amount of the Notes waived
any notice requirement under the Indenture with respect to such Merger. In
addition, upon consummation of the Merger, the Company delivered to the Trustee
the officer's certificate and opinion of counsel required by Section 7.1 of the
Indenture.
Events of Default
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note at its maturity, whether or not
such payment is prohibited by the subordination provisions of the Indenture; (b)
failure to pay any interest on any Note or coupon when due, continuing for 30
days, whether or not such payment is prohibited by the subordination provisions
of the Indenture; (c) failure to perform, or the breach of, any covenant or
warranty of the Company in the Indenture, continuing for 60 days after written
notice to the Company by the Trustee as provided in the Indenture; (d) failure
to pay when due the principal of, or acceleration of, any indebtedness for money
borrowed by the Company in excess of $10,000,000 if such indebtedness is not
discharged, or such acceleration is not annulled, within 30 days after written
notice as provided in the Indenture; and (e) certain events of bankruptcy,
insolvency or reorganization. (Section 5.1) Subject to the provisions of the
Indenture relating to the duties of the Trustee in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. (Section 6.3) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate principal
amount of the Outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee. (Section 5.12)
If an Event of Default shall occur and be continuing, either the Trustee or
the Holders of at least 25% in principal amount of the Outstanding Notes may
accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of Outstanding Notes may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the nonpayment of accelerated principal, have been cured or
waived as provided in the Indenture. (Section 5.2) For information as to waiver
of defaults, see "-Meetings, Modification and Waiver".
No Holder of any Note or coupon shall have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless also the Holders of not less than 25% in
principal amount of the Outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
(Section 5.7) However, such limitations do not apply to a suit instituted by a
Holder of a Note or coupon for the enforcement of payment of the principal of,
premium, if any, or interest on such Note or such coupon on or after the
respective Stated Maturities expressed in such Note or coupon or of the right to
convert such Note in accordance with the Indenture. (Section 5.8)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 10.9)
Meetings, Modification and Waiver
The Indenture contains provisions for convening meetings of the Holders of
Notes to consider matters affecting their interests. (Article Nine)
Modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, either (i) with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time Outstanding or (ii) by the adoption of a Resolution, at a
meeting of Holders of the Notes at which a quorum is present, by the Holders of
at least 66 2/3% in aggregate principal amount of the Outstanding Notes
represented at such meeting or by a majority in aggregate principal amount of
the Notes at the time Outstanding. However, no such modification or amendment
may, without the consent of the Holder of each Outstanding Note or coupon
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note or coupon, (b) reduce the principal amount
or the rate of interest payable on any Note or coupon, (c) reduce the amount
payable upon redemption or repurchase, (d) modify the provisions with respect to
the repurchase right of the Holders in a manner adverse to the Holders, (e)
change the obligation of the Company to pay additional amounts described above
under "-Payment of Additional Amounts", (f) change the coin or currency for
payment of principal of, premium, if any, interest on, or any other amount
payable on, any Note or coupon, (g) impair the right to institute suit for the
enforcement of any payment in respect of any Note or coupon on or after the
Stated Maturity thereof (or, in the case of redemption or any repurchase after
the Redemption Date or Repurchase Date, as the case may be), (h) modify the
obligation of the Company to maintain an office or agency in New York City and
in a Western European city, (i) modify the subordination provisions in a manner
adverse to the Holders of the Notes, (j) reduce the above-stated percentage of
Outstanding Notes necessary to modify or amend the Indenture, (k) reduce the
percentage of aggregate principal amount of Outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults, (l) reduce the percentage in aggregate principal amount of
Notes Outstanding required for the adoption of a resolution or the quorum
required at any meeting of Holders of Notes at which a resolution is adopted,
(m) adversely affect the right to convert any Note except as permitted as
described under "-Conversion Rights", (n) modify the obligation of the Company
to deliver information required under Rule 144A to permit resales of Notes and
USA Waste Common Stock issuable upon conversion thereof in the event the Company
ceases to be subject to certain reporting requirements under the United States
securities laws, (o) modify the provisions described under "-Repurchase at
Option of Holders Upon a Change in Control" in a manner adverse to the Holders
or (p) modify certain of the Company's obligations under the Registration Rights
Agreement (as defined under "Description of Registration Rights Agreement") or
its obligation to pay additional interest upon any failure to comply with such
obligations. (Sections 5.13, 8.2, 9.4, 10.10, 10.11, 10.12 and 10.13) The quorum
at any meeting called to adopt a resolution will be persons holding or
representing a majority in aggregate principal amount of the Notes at the time
Outstanding and, at any reconvened meeting adjourned for lack of a quorum, 25%
of such aggregate principal amount. (Section 9.4)
The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. (Section 10.13) The Holders of (i) 66 2/3% in aggregate principal
amount of the Outstanding Securities represented at a meeting of Holders of
Outstanding Securities at which a quorum is present or (ii) a majority in
aggregate principal amount of the Outstanding Notes may waive any past default
under the Indenture, except a default in the payment of principal, premium, if
any, or interest or a default with respect to a covenant or condition that may
only be modified or amended with the consent of each Holder. (Section 5.13)
Registration Rights
If the Company fails to comply with certain of its obligations under the
Registration Rights Agreement (as defined under "Description of Registration
Rights Agreement"), additional interest is payable on the Registered Notes as
described under "Description of Registration Rights Agreement-Additional
Interest". (Section 10.12)
Transfer and Exchange
At the option of the Holder upon written request, and subject to the terms
of the Indenture, Bearer Notes (with all unmatured coupons, except as provided
below) are exchangeable for Registered Notes, of any authorized denomination and
of like aggregate principal amount, and Registered Notes are exchangeable for
Registered Notes of any authorized denomination and of like aggregate principal
amount. See "-Form and Denomination". Bearer Notes surrendered in exchange for
Registered Notes between a Regular Record Date and the next succeeding Interest
Payment Date or between a Special Record Date before the related date for
payment of Defaulted Interest shall be surrendered without the coupons relating
to such Interest Payment Date or proposed date of payment, as the case may be,
and interest or Defaulted Interest, as the case may be, will not be payable on
such Interest Payment Date or such related date for payment of Defaulted
Interest, as the case may be, in respect of the Registered Note issued in
exchange for such Bearer Note, but will be payable only to the Holder of such
coupon when due in accordance with the provisions of the Indenture. Registered
Notes may not be exchanged for Bearer Notes. (Section 3.5)
Bearer Notes may be presented for exchange at the office of any transfer
agent outside the United States. Registered Notes may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed) or exchange, at any office maintained by the Company for such purpose,
without service charge but, in the case of a transfer, upon payment of any taxes
and other governmental charges as described in the Indenture. Every Registered
Note presented or surrendered for registration of transfer or for exchange (if
so required by the Company or the Security Registrar) shall be duly endorsed, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed, by the Holder thereof or his
attorney duly authorized in writing. Registered Notes may be transferred in
whole or in part in authorized denominations. Upon a registration of transfer,
the Company will execute, and the Trustee will authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Registered
Notes of any authorized denominations and of a like aggregate principal amount
and bearing such restrictive legends as may be required by the Indenture. Upon
an exchange, the Company will execute, and the Trustee will authenticate and
deliver, the Registered Notes which the holder making the exchange is entitled
to receive. (Section 3.5)
The Company has initially appointed the Trustee as security registrar and
transfer agent, acting through its Corporate Trust Office in The City of New
York, and has appointed Bankers Trust Company acting through its London, England
office as transfer agent. The Company reserves the right to vary or terminate
the appointment of the security registrar or of any transfer agent or to appoint
additional or other transfer agents or to approve any change in the office
through which any security registrar or any transfer agent acts, provided that
there will at all times be a security registrar in and a transfer agent in a
Western European city. (Sections 1.1, 3.5 and 10.2)
In the event of a redemption of less than all of the Notes (other than a
redemption of Bearer Notes for the reasons described in the Second Paragraph
under "-Redemption-Redemption for Taxation Reasons"), the Company will not be
required (a) to register the transfer or exchange of Registered Notes or to
exchange Bearer Notes for Registered Notes for a period of 15 days immediately
preceding the date notice is given identifying the serial numbers of the Notes
called for such redemption, (b) to register the transfer or exchange of any
Registered Note, or portion thereof, called for redemption, or (c) to exchange
any Bearer Note called for redemption; provided, however, that a Bearer Note
called for redemption may be exchanged for a Registered Note which is
simultaneously surrendered to the registrar or transfer agent making such
exchange with written instructions for conversion consistent with the provisions
described under "-Conversion Rights" and "-Payment and Conversion" above.
(Section 3.5)
Purchase and Cancellation
The Company or any subsidiary may at any time and from time to time
purchase Notes at any price in the open market or otherwise.
All Securities and coupons surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Bearer
Securities and coupons so surrendered shall be immediately canceled by such
Person upon receipt prior to being forwarded to the Trustee. All Registered
Securities so delivered to the Trustee shall be canceled promptly by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in the Indenture. (Section 3.9)
Title
Title to the Bearer Notes and the coupons will pass by delivery. The
Company, the Trustee, any Paying Agent and any other agent of the Company or the
Trustee may treat the bearer of any Bearer Note or any coupon as the absolute
owner thereof for the purpose of receiving payment thereof and for all other
purposes whatsoever (whether or not such Note or coupon shall be overdue).
Prior to due presentment of a Registered Note for registration of transfer, the
Company, the Trustee, the Paying Agent and any other agent of the Company or the
Trustee may treat the Person in whose name such Registered Note is registered as
the owner thereof for the purpose of receiving payment thereof and for all other
purposes whatsoever. (Section 3.8)
Notices
Notice to Holders of the Notes will be given by publication in Authorized
Newspapers in London or, if publication in London is not practical, elsewhere in
Western Europe. Notices to Holders of Registered Notes will also be given by
mail to the addresses of such Holders as they appear in the Security Register.
Such notices will be deemed to have been given when mailed. (Section 1.6)
Notice of a redemption of Notes (other than a redemption described in the
second paragraph under "-Redemption for Taxation Reasons") will be given at
least once not less than 30 nor more than 60 days prior to the redemption date
(which notice shall be irrevocable except as otherwise provided in the second
paragraph under "-Redemption for Taxation Reasons") and will specify the
redemption date. (Section 11.5)
Replacement of Notes and Coupons
Notes (including any coupons appertaining to Bearer Notes) that become
mutilated, destroyed, stolen or lost will be replaced by the Company at the
expense of the Holder upon delivery to the Trustee or to a transfer agent
outside the United States of the mutilated Notes and coupons or evidence of the
loss, theft or destruction thereof satisfactory to the Company and the Trustee
or a Transfer Agent. In the case of a lost, stolen or destroyed Note or coupon,
indemnity satisfactory to the Trustee and the Company may be required at the
expense of the Holder of such Note or coupon before a replacement Note (with the
relevant coupons appertaining thereto, if any) or coupon will be issued.
(Section 3.6)
Payment of Stamp and Other Taxes
The Company shall pay all stamp and other duties, if any, which may be
imposed by the United States or the United Kingdom or any political subdivision
thereof or taxing authority thereof or therein with respect to the issuance,
transfer, exchange or conversion of the Notes or any coupon. (Section 10.7)
Except as described under "-Payment of Additional Amounts", the Company will not
be required to make any payment with respect to any other tax, assessment or
governmental charge imposed by any government or any political subdivision
thereof or taxing authority therein. (Section 2.2)
Governing Law
The Indenture, the Notes and the coupons will be governed by and construed
in accordance with the laws of the State of New York, United States of America.
(Section 1.12)
The Trustee
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity. (Sections 6.1 and 6.3)
DESCRIPTION OF REGISTRATION RIGHTS AGREEMENT
The following summary of certain provisions of the Registration Rights
Agreement (as defined below) does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement. The Registration Rights Agreement is filed
(through incorporation by reference) as an exhibit to the Registration Statement
of which this Prospectus forms a part.
Registration Statement
The Company has filed the Registration Statement of which this Prospectus
forms a part pursuant to a Registration Rights Agreement dated June 5, 1996 (the
"Registration Rights Agreement"), among the Company and Goldman Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Alex Brown & Sons
Incorporated, CS First Boston Corporation, Prudential Securities Incorporated
and Robertson Stephens & Company, LLC (the "Underwriters"). The Registration
Rights Agreement required the Company to file a Registration Statement (the
"Shelf Registration Statement") covering resale of the Registrable Securities
(as defined below)with the Commission within 90 days following June 5, 1996 and
to use its reasonable best efforts to have the Shelf Registration Statement
declared effective within 90 days after such filing. Subject to the following
paragraph, the Shelf Registration Statement is required to cover the resale of
the following securities (collectively, the "Registrable Securities"): (i) all
of the Notes (other than any Notes that are in bearer form or that were
converted from bearer to registered form after August 29, 1996) and (ii) all
shares of USA Waste Common Stock that may be acquired by any Selling Security
Holder upon conversion of any Note that is required to be covered by the Shelf
Registration Statement as described in the preceding clause. The Company is
obligated to keep the Shelf Registration Statement effective until the earliest
of (i) the expiration of three years from the time the Shelf Registration
Statement was declared effective (the "effective time"), (ii) such time as all
Registrable Securities have been sold pursuant to the Shelf Registration
Statement, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in a new security not subject to
transfer restrictions under the Securities Act being delivered pursuant to the
Indenture and (iii) such time as, in the opinion of counsel, all of the
Registrable Securities held by non-affiliates of the Company are eligible for
resale pursuant to Rule 144(k) under the Securities Act and the legends relating
to transferability that pursuant to the Indenture are required to appear on the
face of each Restricted Security (as defined in the Indenture) have been removed
from such Registrable Securities.
The Company is only required to include in the Shelf Registration Statement
the Registrable Securities that are (i) held by Holders who delivered to the
Company a Selling Securityholder's Questionnaire (substantially in the form
included in the Registration Rights Agreement) on or prior to August 29, 1996
(each such Holder, an "Electing Holder") and (ii) to the extent provided in the
following sentence, held by Holders that acquire Registrable Securities from an
Electing Holder. Any Holder that acquires any Registrable Securities from an
Electing Holder (excluding any Registrable Securities that were not identified
in the Selling Securityholder's Questionnaire delivered by such Electing Holder)
will be entitled to have such Registrable Securities included in the Shelf
Registration Statement, provided that such transferee furnishes the Company with
an updated Selling Securityholder's Questionnaire. The Registrable Securities
covered by such updated Selling Securityholder's Questionnaire will be included
in the Shelf Registration Statement reasonably promptly after receipt thereof
(which date of inclusion may be subsequent to the effective time).
Additional Interest
In the event that, during the period that the Company is required to
maintain the effectiveness of the Shelf Registration Statement, the Shelf
Registration Statement ceases to be effective (or the Holders are otherwise
prevented or restricted by the Company from effecting sales pursuant thereto)
for more than 60 days, whether or not consecutive, during any 12-month period
(an "Effectiveness Failure"), then the interest rate borne by Registered Notes
will increase by an additional one-half of one percent (0.50%) per annum from
the 61st day of the applicable 12-month period such Shelf Registration Statement
ceases to be effective (or the Holders are otherwise prevented or restricted by
the Company from effecting sales pursuant thereto) until such time as the
Effectiveness Failure is cured. For the purpose of determining an Effectiveness
Failure, days on which the Company has been obligated to pay additional interest
in accordance with the foregoing in respect of a prior Effectiveness Failure
within the applicable 12-month period will not be included.
Underwritten Offering
The Registration Rights Agreement provides that holders of 33 1/3% of the
Registrable Securities may elect to have one underwritten offering. The
managing underwriter(s) for any such offering must be selected by Holders of 50%
of the Registrable Securities to be included in the underwritten offering and
must be reasonably acceptable to the Company. The Company has the right to
defer any underwritten offering for up to 120 days for a valid business reason.
Fees and Expenses
The Company is required to pay all fees and expenses incident to the filing
of the Shelf Registration Statement and maintaining its effectiveness for
resales of Registrable Securities. In addition, the Company is required to pay
up to a maximum of $80,000 for the fees and disbursements of a single counsel
selected by Holders of not less than 25% of the Registrable Securities to
represent them in connection with the Shelf Registration Statement. Except as
provided in the preceding sentence, the Holders of Registrable Securities
included in the Shelf Registration Statement will be responsible (on a pro rata
basis based on the principal amount of Registrable Securities included therein)
for the fees and disbursements of such counsel.
In the case of an underwritten offering, the Company will pay up to a
maximum of $200,000 for the fees and expenses in connection therewith (the fees
and disbursements of one counsel for the holders participating in such offering
being included in such fees and expenses). The Holders participating in such
offering will be responsible (on a pro rata basis based on the principal amount
of Registrable Securities included in such offering) for all fees and expenses
of such underwritten offering in excess of $200,000, including any fees and
expenses of counsel to the Holders, counsel to the Company and the Company's
independent public accountants that may constitute part of such excess amount.
In no event will the Company be responsible for underwriting discounts or
commissions.
Indemnification
In the Registration Rights Agreement, the Company has agreed to indemnify
the Holders of Registrable Securities against certain liabilities, including
liabilities under the Securities Act, and each Holder of Registrable Securities
included in the Shelf Registration Statement is obligated to indemnify the
Company and any other Holder against any liability with respect to any
information furnished by such Holder in writing to the Company (including,
without limitation, in a Selling Securityholder's Questionnaire) expressly for
use in the Shelf Registration Statement.
Notes Covered by Prospectus
This Prospectus relates to the offer and sale of the Notes by each Selling
Security Holder (as defined under "Selling Security Holders"). This Prospectus
includes Notes to be offered and sold by Selling Security Holders who did not
complete the Selling Securityholders Questionnaire before August 29, 1996.
CERTAIN TAX CONSIDERATIONS
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition of
the Notes and of USA Waste Common Stock into which Notes may be converted, but
does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This summary is based on laws, regulations,
rulings and decisions now in effect (or, in the case of certain United States
Treasury Regulations ("Treasury Regulations"), now in proposed form), all of
which are subject to change. This summary deals only with holders that will
hold Notes and USA Waste Common Stock into which Notes may be converted as
"capital assets" (within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code")) and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as banks,
tax-exempt organizations, insurance companies, dealers in securities or
currencies, persons that will hold Notes as a position in a hedging transaction,
"straddle" or "conversion" transaction for tax purposes, or persons that have a
"functional currency" other than the U.S. dollar. INVESTORS CONSIDERING THE
PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX
TREATY.
United States Holder
As used herein, the term "United States Holder" means the beneficial owner
of a Note or USA Waste Common Stock that for United States federal income tax
purposes is (i) a citizen or resident of the United States, (ii) treated as a
domestic corporation or domestic partnership, or (iii) an estate or trust other
than a "foreign estate" or "foreign trust" as defined in Section 7701 (a) (31)
of the Code. For purposes of the following, it is assumed that a United States
Holder will own only Registered Notes. Generally, a United States Holder who
owns Bearer Notes will not be entitled to deduct any loss sustained on the sale,
exchange, or redemption of a Bearer Note, and any gain to such a Holder on the
sale, exchange, or redemption of a Bearer Note will be treated as ordinary
income as opposed to capital gain.
Payment of Interest
Interest on a Note generally will be includible in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such Holder's method of accounting for United States
federal income tax purposes.
Sale, Exchange or Redemption of the Notes
Except as discussed below under "-Market Discount", upon the sale, exchange
or redemption of a Note, a United States Holder generally will recognize capital
gain or loss equal to the difference between (i) the amount of cash proceeds and
the fair market value of any property received on the sale, exchange or
redemption (except to the extent such amount is attributable to accrued interest
income, which is taxable as ordinary income) and (ii) such Holder's adjusted tax
basis in the Note. A United States Holder's adjusted tax basis in a Note
generally will equal the cost of the Note to such holder, less any principal
payments received by such holder. Such capital gain or loss will be long
term-capital gain or loss if the United States Holder's holding period in the
Note is more than one year at the time of sale, exchange or redemption.
Market Discount
Purchasers of Notes may be affected by the market discount provisions of
sections 1276 through 1278 of the Code. Under the market discount rules, if a
Note is purchased at a market discount (i.e., at a price below its stated
redemption price at maturity) in excess of a statutorily-defined de minimis
amount and the purchaser subsequently recognizes gain upon a disposition or
retirement of the Note, the lesser of (i) the gain recognized or (ii) the
portion of the market discount that accrued on a ratable basis while such holder
held the Note (or, if the purchaser so elects, on a constant interest rate
basis) generally will be treated as ordinary income at the time of the
disposition. For most purposes, such income would be treated as interest income
to a United States Holder. Moreover, accrued market discount on a Note may be
taxable to an investor to the extent of appreciation at the time of certain
otherwise non-taxable transactions (e.g., gifts). In addition, unless the
purchaser elects to include market discount in income as it accrues, a purchaser
of a market discount debt instrument may be required to defer a portion of any
otherwise deductible interest expense on indebtedness incurred or maintained to
purchase or carry such debt instrument until the holder disposes of the debt
instrument in a taxable transaction.
Amortizable Bond Premium
If a United States Holder purchases a Note for a premium (i.e., for an
amount that is greater than the amount--other than certain stated
interest--payable at maturity) that exceeds the value of the conversion
privilege, such Holder will be considered to have purchased such Note with
"amortizable bond premium" equal in amount to such excess. Such a United States
Holder may elect (in accordance with section 171 of the Code) to amortize such
premium (as an offset to interest income on the Note), using a constant yield
method. The amount of amortizable bond premium and the term over which it is to
be amortized are determined with reference to the amount payable on maturity or,
if it results in a smaller premium attributable to the period ending on an
earlier redemption date, with reference to the amount payable on the earlier
redemption date. Under regulations recently proposed by the United States
Treasury Department, a United States Holder who purchases a Note sixty or more
days after such regulations are finalized, would in determining the amortizable
amount take into account the Company's right to call the Notes only if exercise
of the call would increase such United States Holder's yield on the Note. A
Holder who elects to amortize bond premium must reduce his tax basis in the Note
each year by the amount of the premium amortized in that year. An election to
amortize bond premium applies to all taxable debt obligations then owned and
thereafter acquired by the taxpayer and may be revoked only with the consent of
the Internal Revenue Service with respect to debt instruments acquired after
revocation.
Conversion of the Notes
A United States Holder generally will not recognize any income, gain or
loss upon conversion of a Note into USA Waste Common Stock except with respect
to cash received in lieu of a fractional share of USA Waste Common Stock. Such
Holder's tax basis in the USA Waste Common Stock received on conversion of a
Note will be the same as such Holder's adjusted tax basis in the Note at the
time of conversion (reduced by any basis allocable to a fractional share
interest), and the holding period for the USA Waste Common Stock received on
conversion will generally include the holding period of the Note converted.
Any accrued market discount not previously taken into income prior to a
conversion of a Note would (under rules to be set forth in Treasury Regulations
that have not yet been issued) carry over to the USA Waste Common Stock received
on conversion and be treated as ordinary income to the extent of any gain
recognized on a subsequent disposition of the USA Waste Common Stock.
Cash received in lieu of a fractional share of USA Waste Common Stock upon
conversion will be treated as a payment in exchange for the fractional share of
USA Waste Common Stock. Accordingly, the receipt of cash in lieu of a
fractional share of USA Waste Common Stock generally will, except to the extent
of accrued market discount attributable to such fractional share, result in
capital gain or loss (measured by the difference between the cash received for
the fractional share and the United States Holder's adjusted tax basis in the
fractional share).
Dividends
Dividends paid on the USA Waste Common Stock generally will be includible
in the income of a United States Holder as ordinary income to the extent of USA
Waste's current or accumulated earnings and profits.
If at any time (i) USA Waste makes a distribution of cash or property to
its stockholders or purchases USA Waste Common Stock and such distribution or
purchase would be taxable to such stockholders as a dividend for United States
federal income tax purposes (e.g., distributions of property would include
distributions of evidences of indebtedness or assets of USA Waste, but generally
not stock dividends or rights to subscribe for USA Waste Common Stock) and,
pursuant to the anti-dilution provisions of the Indenture, the conversion price
of the Notes is decreased, or (ii) the conversion price of the Notes is
decreased at the discretion of the Company, such decrease in conversion price
may be deemed to be the payment of a taxable dividend to Holders of Notes
(pursuant to Section 305 of the Code). Holders of Notes could therefore have
taxable income as a result of an event pursuant to which they received no cash
or property.
Sale of USA Waste Common Stock
Upon the sale or exchange of USA Waste Common Stock, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash and the fair market value of any property received upon
the sale or exchange and (ii) such Holder's adjusted tax basis in the USA Waste
Common Stock. Such capital gain or loss will be long-term if the United States
Holder's holding period in the USA Waste Common Stock is more than one year at
the time of the sale or exchange. Gain on the sale or exchange of the USA Waste
Common Stock may, however, be ordinary income to the extent of any market
discount accrued on the Notes at the time of conversion into USA Waste Common
Stock. A United States Holder's basis and holding period in and the effect of
market discount on USA Waste Common Stock received upon conversion of a Note are
discussed above under "-Conversion of the Notes".
Information Reporting and Backup Withholding Tax
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on USA
Waste Common Stock, payments of the proceeds of the sale of a Note and payments
of the proceeds of the sale of USA Waste Common Stock to certain non-corporate
United States Holders, and a 31% backup withholding tax may apply to such
payments if the United States Holder (i) fails to furnish or certify his correct
taxpayer identification number to the payor in the manner required, (ii) is
notified by the Internal Revenue Service (the "IRS") that he has failed to
report payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a
payment to a United States Holder will be allowed as a credit against such
holder's United States federal income tax and may entitle the holder to a refund
provided that the required information is furnished to the IRS.
Non-United States Holders
As used herein, the term "Non-United States Holder" means any beneficial
owner of a Note or USA Waste Common Stock that is not a United States Holder.
Payment of Interest
Payment of interest on a Note or coupon by the Company or any Paying Agent
to a Non-United States Holder will qualify for the "portfolio interest
exemption" and therefore will not be subject to United States federal income tax
or withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-United States Holder
and provided that the Non-United States Holder (i) does not actually or
constructively own 10% or more of the combined voting power of all classes of
stock of the Company entitled to vote, (ii) is not a controlled foreign
corporation related to the Company actually or constructively through stock
ownership, (iii) is not a bank receiving interest on a loan entered into in the
ordinary course of business, (iv) is not, and does not receive payments in an
account, within a country designated by the Internal Revenue Service as not
qualifying for the portfolio interest exemption (it being understood that,
although the Internal Revenue Service has not at the current time made such
designation or given any public notice it intends to do so in the future, it has
the statutory authority so to do) and (v) in the case of a Registered Note,
either (a) provides a Form W-8 (or a suitable substitute form) signed under
penalties of perjury that includes its name and address and certifies as to its
non-United States status in compliance with applicable law and regulations, or
(b) a securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
holds the Note and provides a statement to the Company or its agent under
penalties of perjury in which it certifies that such a Form W-8 (or a suitable
substitute) has been received by it from the Non-United States Holder or
qualifying intermediary and furnishes the Company or its agent a copy thereof.
Recently proposed Internal Revenue Service regulations ("the Proposed
Certification Regulations") would provide alternative methods for satisfying the
certification requirement described in the preceding paragraph. The Proposed
Certification Regulations would also generally require, in the case of Notes
held by a foreign partnership, that (x) the certification described above be
provided by the partners, rather than by the partnership, and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed Certification Regulations are proposed to be
effective for payments made after December 31, 1997. There can be no assurance
that the Proposed Certification Regulations will be adopted, or as to the
provisions that they will include if and when adopted, in temporary or final
form.
Except to the extent that an applicable treaty otherwise provides, a
Non-United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Non-United States
Holder. Effectively connected interest received by a corporate Non-United
States Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Even though such effectively connected interest is subject to income tax, and
may be subject to the branch profits tax, it is not subject to withholding tax
if the Holder delivers a completed IRS Form 4224 to the payor.
Interest income of a Non-United States Holder that is not effectively
connected with a United States trade or business and that does not qualify for
the portfolio interest exemption described above will generally be subject to a
30% (or lower treaty rate) withholding tax.
Sale, Exchange or Redemption of the Notes
A Non-United States Holder of a Note or coupon will generally not be
subject to United States federal income tax or withholding tax on any gain
realized on the sale, exchange or redemption of the Note or coupon (including
the receipt of cash in lieu of fractional shares upon conversion of a Note into
USA Waste Common Stock) unless (1) the gain is effectively connected with a
United States trade or business of the Non-United States Holder, (2) in the case
of a Non-United States Holder who is an individual, such Holder is present in
the United States for a period or period aggregating 183 days or more during the
taxable year of the disposition, and either such Holder has a "tax home" in the
United States or the disposition is attributable to an office or other fixed
place of business maintained by such Holder in the United States, (3) the Holder
is subject to tax pursuant to the provisions of the Code applicable to certain
United States expatriates, or (4) the Company is a United States real property
holding corporation (see discussion under "-United States Foreign Investment in
Real Property Tax Act" below).
Conversion of the Notes
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of a Note into USA Waste Common Stock by a
Non-United States Holder except with respect to the receipt of cash in lieu of
fractional shares by Non-United States Holders upon conversion of a Note where
any of the conditions described above under "-Non-United States Holders-Sale,
Exchange or Redemption of the Notes" is satisfied.
Sale or Exchange of USA Waste Common Stock
A Non-United States Holder generally will not be subject to United States
federal income tax or withholding tax on the sale or exchange of USA Waste
Common Stock unless any of the conditions described above under "-Non-United
States Holders-Sale, Exchange or Redemption of the Notes" is satisfied.
Dividends
Dividends paid (or deemed paid, as described above under "-United States
Holders-Dividends") on USA Waste Common Stock to a Non-United States Holder
(excluding dividends that are effectively connected with the conduct of a trade
or business in the United States by such Holder and are taxable as described
below) will be subject to United States federal withholding tax at a 30% rate
(or lower rate provided under any applicable income tax treaty). Except to the
extent that an applicable tax treaty otherwise provides, a Non-United States
Holder will be taxed in the same manner as a United States Holder on dividends
paid (or deemed paid) that are effectively connected with the conduct of a trade
or business in the United States by the Non-United States Holder. If such
Non-United states Holder is a foreign corporation, it may also be subject to a
United States branch profits tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. Even though such effectively
connected dividends are subject to income tax, and may be subject to the branch
profits tax, they will not be subject to U.S. withholding tax if the Holder
delivers a completed IRS Form 4224 to the payor.
Under current United States Treasury Regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding tax discussed above and, under the current interpretation of United
States Treasury Regulations, for purposes of determining the applicability of a
tax treaty rate. Under the Proposed Certification Regulations described under
"-Non-United States Holders-Payment of Interest", however, a Non-United States
Holder of USA Waste Common Stock who wished to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
requirements. In addition, under the Proposed Certification Regulations, the
certification and information reporting requirements described above in the
second paragraph under "-Non-United States Holders-Payment of Interest" would
apply with respect to dividends paid on USA Waste Common Stock held by a foreign
partnership.
Death of a Non-United States Holder
A Note or coupon held by an individual who is not a citizen or resident of
the United States at the time of death will not be includible in the decedent's
gross estate for United States estate tax purposes, provided that such holder or
beneficial owner did not at the time of death actually or constructively own 10%
or more of the combined voting power of all classes of stock of the Company
entitled to vote, and provided that at the time of death payments with respect
to such Note or coupon would not have been effectively connected with the
conduct by such Non-United States Holder of a trade or business within the
United States.
USA Waste Common Stock actually or beneficially held by a Non-United States
Holder at the time of his or her death (or previously transferred subject to
certain retained rights or powers) will be subject to United States federal
estate tax unless otherwise provided by an applicable estate tax treaty.
Information Reporting and Backup Withholding Tax
Under current law, United States information reporting requirements and
backup withholding tax will not apply to (i) payments on a Bearer Note or coupon
made outside the United States (other than payments made to an address in the
United States or by transfer to an account maintained by the holder with a bank
in the United States) by the Company or by any Paying Agent (acting in its
capacity as such) to a Non-United States Holder or (ii) payments on a Registered
Note to a Non-United states Holder if the Form W-8 or similar statement
described in "-Non-United States Holders-Payment of Interest" is duly provided
by such Holder, provided that the payor does not have actual knowledge that the
holder is a United States person. If and when the Proposed Certification
Regulations described under "-Non-United States Holders-Payment of Interest"
become effective, alternative certification requirements (and, possibly,
partner-level certification requirements in the case of Holders that are foreign
partnerships) may apply with respect to Registered Notes. See the discussion
above under "-Non-United States Holders-Payment of Interest".
Information reporting and backup withholding tax also will not apply to any
nominee or other agent of the beneficial owner of such Note or coupon, unless
such custodian nominee or agent (i) is a United States person, (ii) derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States or (iii) is a controlled foreign corporation as to
the United States. Payment on a Bearer Note or coupon outside the United States
to the beneficial owner thereof by a foreign office of any custodian, nominee or
agent that is described in (i), (ii) or (iii) of the preceding sentence will not
be subject to backup withholding tax, but will be subject to information
reporting requirements unless such custodian, nominee or agent has documentary
evidence in its records that the beneficial owner is a Non-United States holder
and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment on a Note or coupon to the beneficial owner
thereof by a United States office of a custodian, nominee or agent is subject to
information reporting and backup withholding requirements, unless the beneficial
owner of the Note or coupon provides the Form W-8 or suitable substitute
statement described under "-Non-United States Holders-Payments of Interest" or
the beneficial owner otherwise establishes an exemption.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a Registered or Bearer Note
or coupon or any payment of the proceeds of the sale of USA Waste Common Stock
effected outside the United States by a foreign office of a "broker" (as defined
in applicable Treasury Regulations), unless such broker (i) is a United States
person, (ii) derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States or (iii) is a controlled
foreign corporation as to the United States. Payment of the proceeds of any
such sale effected outside the United States by a foreign office of any broker
that is described in (i), (ii) or (iii) of the preceding sentence will not be
subject to backup withholding tax, but will be subject to information reporting
requirements unless such broker has documentary evidence in its records that the
beneficial owner is a Non-United States Holder and certain other conditions are
met, or the beneficial owner otherwise establishes an exemption. Payment of the
proceeds of any such sale to or through the United States office of a broker is
subject to information reporting and backup withholding requirements, unless the
beneficial owner of the Note or coupon provides the Form W-8 or suitable
substitute statement described under "-Non-United States Holders-Payment of
Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on USA Waste
Common Stock held by a Non-United States Holder will not under current law be
subject to the information reporting and backup withholding requirements
discussed in this section, provided that the payor does not have actual
knowledge that the payee is a United States person. However, under the Proposed
Certification Regulations, dividend payments generally would be subject to
information reporting unless applicable certification requirements are
satisfied. See the discussion above under "-Non-United States Holders-Payment
of Interest" with respect to these requirements and the additional requirements
that would be applicable to foreign partnerships under the Proposed
Certification Regulations.
The backup withholding and information reporting rules are currently under
review by the Department of the Treasury, and their application to the Notes,
coupons and USA Waste Common Stock could be changed prospectively by future
regulations.
United States Foreign Investment in Real Property Act
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), any
person who acquires a "United States real property interest" (as described
below) from a foreign person must deduct and withhold a tax equal to 10% of the
amount realized by the foreign transferor. In addition, a foreign person who
disposes of a United States real property interest generally is required to
recognize gain or loss that is subject to United States federal income tax. A
"United States real property interest" generally includes any interest (other
than an interest solely as creditor) in a United States corporation unless it is
established under specific procedures that the corporation is not (and was not
at any time during the prior five-year period) a "United States real property
holding corporation". The Company does not believe that it is a United States
real property holding corporation as of the date hereof, although it has not
conducted or obtained an appraisal of its assets to determine whether it is now
or will be a United States real property holding corporation. If it is not
established that the Company is not a United States real property holding
corporation, then, unless an exemption applies, both the USA Waste Common Stock
and Notes would be treated as United States real property interests. As
discussed below, however, an exemption should apply to the USA Waste Common
Stock and the Notes except with respect to a Non-United States Holder whose
beneficial ownership of USA Waste Common Stock or the Notes exceeds 5% of the
total fair market value.
An interest in a United States corporation generally will not be treated as
a United States real property interest if, at any time during the calendar year,
any class of stock of the corporation is "regularly traded" on an established
securities market (the "regularly traded exemption"). The Company believes that
the USA Waste Common Stock is regularly traded on an established securities
market within the meaning of the applicable regulations, although there can be
no assurance that the USA Waste Common Stock will remain regularly traded. The
remainder of this discussion assumes that the USA Waste Common Stock is and will
remain regularly traded on an established securities market.
The regularly-traded exemption is not available to a regularly traded
interest (such as the USA Waste Common Stock) if such interest is owned by a
person who beneficially owns (actually or constructively) more than 5% of the
total fair market value of that class of interests at any time during the
five-year period ending on the date of disposition of such interest or other
applicable determination date. Accordingly, except with respect to a sale or
other disposition of USA Waste Common Stock by a Non-United States Holder whose
aggregate beneficial ownership has exceeded that 5% threshold, no withholding or
income taxation under the FIRPTA rules should be required with respect to the
sale, exchange or other disposition of USA Waste Common Stock by a Non-United
States Holder.
The regularly traded exemption will apply to a "non-regularly traded class
of interests" in a United States corporation that is convertible into a
regularly traded class of interests in the corporation unless, on the date
such non-regularly traded interest was acquired by its present holder, such
interest had a fair market value greater than the fair market value on that date
of 5% of the regularly traded class of the corporation's stock into which it is
convertible. (Interests of a non-regularly traded class acquired over a period
of time will be aggregated for purposes of applying the 5% test described
above.) This discussion assumes that the Notes constitute interests that are
non-regularly traded interests convertible into a regularly traded class of
interests. (It is not entirely certain how the regularly traded exemption will
apply if the Notes become "regularly traded" within the meaning of the FIRPTA
rules. For example, the regularly traded exemption may in that event not apply
to a Non-United States Holder who actually and constructively owned more than 5%
of the Notes even though Notes owned by such Non-United States Holder
represented no more than 5% of the value of the outstanding USA Waste Common
Stock. However, a transfer of Notes would not be subject to the 10% withholding
tax discussed above if the Notes were regularly traded, regardless of whether
the transferor held more than 5% of the Notes.) Accordingly, except with
respect to the sale, exchange, conversion or redemption of the Notes by a
Non-United States Holder whose aggregate actual or constructive ownership of
such Notes on an applicable determination date had a fair market value greater
than 5% of the USA Waste Common Stock, no withholding or income taxation under
the FIRPTA rules should be required with respect to the sale, exchange,
conversion or redemption of Notes by a Non-United States Holder. A Non-United
States Holder who sells or otherwise disposes of Notes may be required to inform
its transferee whether such Notes constitute a United States real property
interest.
Any investor that may approach or exceed 5% ownership, either alone or in
conjunction with related persons, should consult its own tax advisor concerning
the United States tax consequences that may result.
SELLING SECURITY HOLDERS
The Notes were originally issued by the Company to the Underwriters on June
5, 1996, pursuant to an exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof. The Notes were sold
simultaneously by the Underwriters in transactions exempt from the registration
requirements of the Securities Act pursuant to Rule 144A, Regulation D or
Regulation S under the Securities Act. An aggregate of $150,000,000 principal
amount of Notes was issued and was outstanding as of August 26, 1997.
This Prospectus relates to the offer and sale by each Selling Security
Holder of the Notes that are set forth in the table below with respect to such
Selling Security Holder (as such table may be amended from time to time by means
of a supplement or amendment hereto).
The "Selling Security Holders" include (i) each person and entity that is
identified as a Selling Security Holder in the table below (as such table may be
supplemented or amended from time to time by means of a supplement or amendment
hereto) and (ii) any transferee, donee, pledgee or other successor of any such
person or entity that acquires any of the Notes in a transaction exempt from the
registration requirements of the Securities Act and that is identified in a
supplement or amendment hereto.
Based upon information provided to the Company by each Selling Security
Holder, the table below indicates the aggregate principal amount of Notes
beneficially owned by such Selling Security Holder. The table below also
indicates by footnote reference any material relationship that a Selling
Security Holder has had with the Company during the preceding three years. This
Prospectus covers all securities shown in the table below.
<TABLE>
<CAPTION>
Principal
Amount of
Selling Security Holder(1) Notes Owned
<S> <C>
AIM Advisors $ 1,000,000
Austin Firefighters 135,000
Bancroft Convertible Fund, Inc. 500,000
Bank of America Convertible Securities Fund 50,000
Bankers Trust International PLC 5,000,000
Bankers Trust Trustee for Chrysler Corporation Emp#1 Pension Plan dated 4/1/89 570,000
Baptist Hospital of Miami 95,000
Bond Fund Series - Oppenheimer Bond Fund For Growth 5,500,000
Boston Museum of Fine Arts 40,000
Boulder Capital Inc. 2,500,000
CFW-C, L.P. 7,000,000
Chase Manhattan Bank Trustee for IBM Corporate Retirement Plan Trust dated 12/18/45 2,430,000
Christian Science Trustees for Gifts and Endowments 300,000
Cincinnati Bell Telephone Convertible Value Fund 400,000
Colgate Palmolive 1,200,000
Declaration of Trust for the Defined Benefit Plan of ICI American Holdings Inc. 850,000
Declaration of Trust for the Defined Benefit Plans of ZENECA Holdings Inc. 550,000
Delta Airlines Master Trust 3,590,000
Delaware State Employees' Retirement Fund 3,000,000
Delaware State Retirement Fund-Froley, Revy 610,000
Deutsche Morgan Grenfell Inc. 500,000
Donaldson, Lufkin & Jenrette Securities Corp. 1,000,000
Dunham & Associates Fund 2 45,000
Ellsworth Convertible Growth and Income Fund, Inc. 500,000
Engineers Joint Pension Fund 175,000
Equitable Life Separate Account - Balanced 240,000
Equitable Life Separate Account - Convertibles 2,095,000
First Church of Christ, Scientist-Endowment 400,000
Fiduciary Trust Company International 500,000
Franklin Investors Securities Trust Convertible Securities Fund 1,500,000
General Motors Salaried Employees Convertible Fund 2,315,000
GPZ Trading 1,500,000
Grace Brothers, Ltd. 2,100,000
Highbridge Capital Corporation 3,500,000
Highbridge Capital Corporation, Amalgamated Gadget, L.P. as agent 250,000
Hillside Capital Incorporated Corporate Account 300,000
Hudson River Growth Investors 710,000
Hudson River Trust Balanced Portfolio 1,135,000
Hudson River Trust Growth & Income Portfolio 490,000
ICI American Holdings Pension 255,000
Kapiolani Medical Center 65,000
Kellner DiLeo & Co. 4,300,000
Lincoln National Convertible Securities Fund 530,000
Lincoln National Insurance- Corporate Convertible Securities Pool 2,065,000
Massachusetts Mutual Life Insurance Company 1,150,000
MassMutual Corporate Investors 250,000
MassMutual Corporate Value Partners Limited 500,000
MassMutual Participation Investors 100,000
McMahan Securities Company, L.P. 500,000
Medical Malpractice Insurance Association 100,000
Memphis Light, Gas & Water 785,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated(2) 5,540,000
Lawrence R. Muroff 20,000
Nalco Chemical Retirement Trust 100,000
New York Life Insurance Company Pooled Separate Account No. 7 1,000,000
Nicholas-Appelgate Income & Growth Fund 1,060,000
Northwestern Mutual Life Insurance Company 3,000,000
NB Convertible Arbitrage Partners, L.P. 4,050,000
Occidental College 110,000
OCM Convertible Limited Partnership 250,000
OCM Convertible Trust 5,065,000
OMI Investment Funds Inc. 4,000,000
Oregon Equity Fund 2,640,000
Pacific Horizon Capital Income Fund 175,000
Pacific Mutual Life Insurance Company 500,000
Paloma Securities L.L.C. 4,500,000
Presbyterian Healthcare 240,000
Physicians Life 180,000
Prim Board 925,000
Q Investments, L.P. 750,000
Salomon Brothers Inc. 5,000,000
SAIF Corporation 1,710,000
Sage Capital 1,100,000
San Diego City Retirement 365,000
San Diego County Convertible 1,270,000
Corald L. Schall MD 5,000
Societe Generale Securities Corp. 1,000,000
State Employees' Retirement Fund of the State of Delaware 1,290,000
State of Connecticut Combined Investment Funds 3,255,000
State of Michigan Employees Retirement Fund 900,000
TCW Convertible Securities Fund 1,960,000
TCW Convertible Strategy Fund 600,000
TCW Convertible Value Fund 1,300,000
TCW/DW Income & Growth Fund 300,000
The Catholic Mutual Relief Society of America 200,000
The Catholic Mutual Relief Society of America Retirement Plan & Trust 300,000
The Common Fund 2,300,000
The Main Stay Funds-Convertible Fund 1,000,000
Thermo Electron Balanced Investment Fund 600,000
Tiedemann Boltres Partners-Robert Citrino Execution 550,000
TQA Arbitrage Fund, L.P. 500,000
TQA Leverage Fund, L.P. 500,000
TQA Vantage Fund, Ltd. 500,000
WAFRA Discretionary 140,000
Wake Forest University 285,000
Weirton Trust Convertibles 250,000
Zazove Convertible Fund, L.P. 900,000
Zeneca Holdings Pension 240,000
Additional Selling Security Holders that may be identified in a supplement or amendment hereto 3,300,000
137,800,000
______________________
(1) Each Selling Stockholder is the beneficial owner of the indicated Notes.
In certain cases, the indicated Notes may be held of record by a nominee or
custodian for the account of the Selling Stockholder.
(2) The indicated Selling Stockholder has from time to time provided, and may
in the future provide, certain investment banking services to the Company.
</TABLE>
Assuming that the Selling Security Holders dispose of all securities
covered by this Prospectus (and assuming no additional acquisitions or
dispositions of Notes by such Selling Security Holders), none of the Selling
Security Holders would continue to own any Notes.
PLAN OF DISTRIBUTION
The Notes that may be offered by the Selling Security Holders pursuant to
this Prospectus may be sold from time to time by the Selling Security Holders
directly to purchasers or, alternatively, may be offered from time to time
through agents, brokers, dealers or underwriters, who may receive compensation
in the form of concessions or commissions from the Selling Security Holders or
purchasers of the Notes (which compensation may be in excess of customary
commissions). Any agents, brokers, dealers or underwriters that participate in
the distribution of the Notes may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions received by them and any
profit on the resale of any Notes purchased by them might be deemed to be
underwriting discounts or commissions under the Securities Act.
The Notes may be sold from time to time in one or more transactions at
fixed prices, at prevailing market prices at the time of sale or at prices
related to such market prices, at varying prices determined at the time of sale
or at negotiated prices. The sale of the Notes may be effected in transactions
(which may involve crosses or block transactions) (i) on any national securities
exchange on which the Notes may be listed, (ii) in the over-the-counter market,
(iii) in transactions otherwise than on such exchanges or in the
over-the-counter market or (iv) through the writing of options.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the Notes may not simultaneously engage in market making
activities with respect to such securities during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and
without limiting the foregoing, each Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of Notes by the Selling Security
Holders.
To the extent required, the Company will use its best efforts to file,
during any period in which offers or sales are being made, one or more
supplements to this Prospectus to describe any material information with respect
to the plan of distribution not previously disclosed in this Prospectus or any
material change to such information in this Prospectus.
In order to comply with the securities laws of certain jurisdictions, if
applicable, the Notes will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or any exemption from registration or
qualification is available and is complied with.
See "Description of Registration Rights Agreement" for certain information
concerning the respective obligations of the Company and the Selling Security
Holders (i) to pay certain costs and expenses related to the Registration
Statement of which this Prospectus forms a part and the offer and sale of the
Notes hereunder and (ii)to provide indemnification against certain liabilities
arising under the Securities Act.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page
(1) Annual Consolidated Financial Statements:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . 64
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . 65
Consolidated Statements of Operations for the Years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . 67
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 68
Consolidated Statements of Cash Flows for the Years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . 69
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 72
(2) Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1997 (unaudited)
and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 87
Condensed Consolidated Statements of Operations For the
Six Months Ended June 30, 1997 and 1996 (unaudited) . . . . . . . . . . 89
Condensed Consolidated Statement of Stockholders' Equity
For the Six Months Ended June 30, 1997 (unaudited) . . . . . . . . . . . 90
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . 91
Notes to Unaudited Condensed Consolidated Financial Statements . . . . . 94
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 at Item 16(b). 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
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
1996 1995
Current assets:
<S> <C> <C>
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
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
Current liabilities:
<S> <C> <C>
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 6,524,024
Short-term accrued landfill costs 4,648,923 6,465,720
Current portion of capital lease obligations 846,528 1,383,576
Accrued expenses 15,572,292 11,143,769
Other current liabilities 9,196,178 5,933,633
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 8,900,000 9,400,000
portion
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 __ __
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
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<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 income taxes 60,649,078 43,609,343 28,953,722
Provision for income taxes 25,256,286 15,320,898 7,944,023
Net income 35,392,792 28,288,445 21,009,699
Net deductions from income available to common
stockholders __ 372,501 1,275,180
Income available to common stockholders $ 35,392,792 $ 27,915,944 $ 19,734,519
Primary earnings per common share and common
equivalent share $ .89 $ .82 $ .76
Fully diluted earnings per common share
and common equivalent share $ .88 $ .81 $ .72
Pro forma tax adjustments 363,280 1,458,361 2,064,773
Pro forma net income 35,029,512 26,830,084 18,944,926
Net deductions from pro forma available
to common stockholders __ 372,501 1,275,180
Pro forma net 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
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
ADDITIONAL
NUMBER OF NUMBER 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 568,394 569 7,311,162
options
Conversion of 8% convertible preferred (854,152) (854) 780,563 780 44
stock
Preferred stock dividends (1,275,180)
Contributed capital 590,667
Subchapter S distributions of pooled (3,413,997)
entities
Net income 21,009,699
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
Exercise of common stock warrants and 529,582 530 8,145,726
options
Conversion of 8% convertible preferred (943,429) (944) 862,105 862 82
stock
Conversion of convertible debt 90,969 91 2,660,752
Preferred stock dividends
(372,501)
PREFERRED STOCK COMMON STOCK
ADDITIONAL
NUMBER OF NUMBER OF PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
Subchapter S distributions of pooled
entities (4,133,700)
Net income 28,288,445
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
Two-for-one stock split 18,238,718 18,238 (18,238)
Poolings-of-interests 758,558 759 422,967 (4,781,320)
Adjustments to conform fiscal years of (506,803)
pooled entities
Exercise of common stock warrants and 2,468,630 2,469 43,335,486
options
Issuance of common stock 45,097 45 3,823,807
Subchapter S distributions of pooled (1,240,000)
entities
Net income 35,392,792
Reclassification of Subchapter S 1,142,048 (1,142,048)
accumulated earnings
to paid-in-capital
Balance, December 31, 1996 39,089,553 $39,090 $248,973,700 $69,700,623
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 35,392,792 $ 28,288,445 $21,009,699
Adjustments to reconcile 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)
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:
Purchase 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)
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)
Repayment of capital lease obligations (3,456,053) (614,686) (1,570,971)
The accompanying notes are an integral part of these financial
statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 - CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
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 activities 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
period 6,721,849 2,600,207 1,777,510
Cash and equivalents at end of period $ 2,567,854 $ 6,721,849 $ 2,600,207
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest,
net of amounts capitalized $ 13,328,310 $ 8,337,161 $ 5,970,394
Cash paid during the period for income
taxes $ 5,644,573 $ 10,362,953 $ 3,426,391
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) __
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 - CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
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 $ 777,867 $ 167,370
obligations --
Conversion of convertible preferred stock -- $ 10,377,719 9,395,672
Conversion of convertible debt -- 2,660,843 __
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996
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:
<TABLE>
<CAPTION>
Range of
Estimated
Useful Lives
<S> <C>
Buildings and improvements 25 - 30 years
Vehicles and equipment 7 - 10 years
Furniture, fixtures and office equipment 5 - 10 years
</TABLE>
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 the disposal facility is ready for its intended use.
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.
Accrued Expenses and Other Current Liabilities: Accrued expenses consist
primarily of accrued liabilities related to interest, payroll and payroll taxes,
insurance claims, royalties, and waste taxes. Other current liabilities consist
primarily of contractual obligations, deferred payments and acquisition costs
payable.
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 United 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 United 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:
<TABLE>
<CAPTION>
Carmel
Marina Salinas
United(1) Companies Companies Combined
<S> <C> <C> <C> <C>
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.
</TABLE>
During September 1996, the Company issued 579,857 shares of United Common
Stock for the acquisition of three solid waste management companies. During
December 1996, the Company issued 178,701 shares of United 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 United Common Stock, warrants to purchase 65,000
shares of United 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 United
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
United 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 United 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.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
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
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
</TABLE>
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.
<TABLE>
<CAPTION> December 31,
1996 1995
<S> <C> <C>
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
</TABLE>
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,
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Credit Facility $ 31,450,000 $41,800,000
Convertible Subordinated Notes at 4 1/2% per
annum, due June 1, 2001, convertible to United
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
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
</TABLE>
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
United 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 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 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 "Senior Notes"). The Senior 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 Senior 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 Senior Notes. The Senior 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:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 4,664,413
1998 5,564,456
1999 52,167,791
2000 11,406,981
2001 17,200,242
Thereafter 216,364,649
</TABLE>
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 provision for historical and pro forma federal and state income taxes
is as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
<S> <C> <C> <C>
Historical income taxes:
Current State $ 3,135,854 $ 1,546,649 $ 546,230
Current Federal 12,063,063 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)
$15,320,898
$ 25,256,286 $ 7,944,023
Pro forma tax adjustment:
State 78,743 310,142 450,095
Federal 284,537 1,148,219 1,614,678
363,280 1,458,361 2,064,773
$ 25,619,566 $16,779,259 $10,008,796
</TABLE>
A reconciliation of the provision for 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:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
<S> <C> <C> <C>
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
Income of Subchapter S
Corporations (363,280) (1,458,361) (2,064,773)
(Benefit) for deferred taxes on
Subchapter S Corporation at time
of pooling (314,086)
Other (84,594) (763,103) (542,241)
$ 25,256,286 $15,320,898 $ 7,944,023
</TABLE>
The components of deferred income tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
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
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
</TABLE>
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
United 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 United 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 United 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 United Common Stock in respect
of each share of United 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
United Common Stock were amended pursuant to their own terms to provide for the
issuance of two shares of United Common Stock for every one share that was
issuable prior to the stock split.
At December 31, 1996, approximately 9,176,552 shares of United 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.
United 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 United 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 United 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 affect 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 United 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:
<TABLE>
<CAPTION>
Noncancellable
December 31 Capital Leases Operating Leases
<S> <C> <C>
1997 $ 905,876 $1,257,322
1998 260,955 982,840
1999 113,589 375,242
2000 35,160 295,699
2001 __ 275,000
Thereafter __ 709,202
Total minimum lease 1,315,580 $3,895,305
payments
Less amount representing (95,756) __
interest
Present value of net minimum 1,219,824 __
lease payments
Less current portion (846,528) __
Long-term portion $ 373,296 __
</TABLE>
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. The
Company accrues for such claims when they are incurred. 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, $3,000,000 in promissory notes issued by the Company
for the purchase 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. Such settlement was approved by the Court in the second quarter
of 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 or operating results 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 or operating results 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 machinery
and equipment with an aggregate replacement value of approximately $150,000. In
September 1996, the defendants 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 or operating
results 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 United
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 United 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 had cash and cash equivalents of approximately $69.0
million.
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalent $ 25,823,244 $ 2,567,854
Accounts receivable, net of allowance for doubtful 68,824,043 54,963,664
accounts of $4,898,000 in 1997 and $3,076,000 in
in 1996
Prepaid expenses and other current assets 29,170,740 29,989,310
Total current assets 123,818,027 87,520,828
Property and equipment, net of accumulated depreciation 438,171,464 387,980,224
of $136,429,000 in 1997 and $94,407,000 in 1996
Intangible assets, net 338,309,380 286,851,677
Other assets 40,968,086 38,688,965
$941,266,957 $801,041,694
Current liabilities:
Current portion of long-term debt and nonrecourse bonds $ 6,561,743 $ 5,064,413
Accounts payable 25,448,174 23,923,298
Deferred revenue 13,958,658 12,189,998
Due to seller 5,087,733 4,258,016
Short-term accrued landfill costs 4,745,575 4,648,923
Current portion of capital lease obligations 476,676 846,528
Accrued expenses 24,997,006 15,572,292
Other current liabilities 13,892,939 9,196,178
Total current liabilities 95,168,504 75,699,646
Long-term debt, less current portion 265,252,535 302,704,119
Obligations under capital leases, less current portion 141,197 373,296
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - cont'd
<TABLE>
June 30, December 31,
<CAPTION> 1997 1996
(unaudited)
<S> <C> <C>
Nonrecourse sewage facility revenue bonds, less current portion 8,500,000 8,900,000
Accrued landfill costs 48,259,951 44,878,800
Other long-term liabilities 14,525,536 13,137,811
Deferred income taxes 39,326,427 36,634,609
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 75,000,000 in 1997 and
1996 shares authorized; 44,569,287 in 1997 and 39,089,553
in 1996 shares issued and outstanding 44,569 39,090
Additional paid-in capital 374,084,722 248,973,700
Retained earnings 95,963,516 69,700,623
Total stockholders' equity 470,092,807 318,713,413
$941,266,957 $801,041,694
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Revenues $216,619,407 $151,838,019
Cost of Operations 136,199,914 96,479,784
Selling, general and administrative expense 33,295,326 24,778,093
Income from operations 47,124,167 30,580,142
Interest expense 7,898,849 7,206,432
Other expense (income), net (1,584,695) 1,767,682
Income before provision for income taxes 40,810,013 21,606,028
Provision for income taxes 16,961,046 8,739,293
Net income $ 23,848,967 $ 12,866,735
Primary earnings per common share and common
equivalent share $ .54 $ .33
Fully diluted earnings per common share and
common equivalent share $ .53 $ .32
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
Number of Additional Retained
Shares Amount Paid-in Earnings
Capital
<S> <C> <C> <C> <C>
Balance, December 31, 1996 39,089,553 $39,090 $248,973,700 $69,700,623
Pooling-of-interests 1,752,549 1,752 388,314 527,359
Exercise of common stock
warrants and options 164,150 164 3,995,630
Issuance of common stock 3,563,035 3,563 122,461,987
Pro forma tax adjustment 319,803
Subchapter S distributions of
pooled entities (168,145)
Reclassification of Subchapter
S accumulated earnings to
paid-in capital (1,734,909) 1,734,909
Net income 23,848,967
Balance, June 30, 1997 44,569,287 $44,569 $374,084,722 $95,963,516
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,848,967 $ 12,866,735
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,380,878 17,744,758
Deferred income taxes 5,134,491 2,077,749
Gain on sale of assets (647,564) (126,445)
Pro forma tax adjustment 319,803 (133,034)
Changes in operating assets and liabilities:
Accounts receivable (8,660,503) (3,891,052)
Other assets 2,401,049 (1,039,894)
Accounts payable 1,076,250 (141,944)
Accrued landfill costs (1,566,614) 4,811
Other liabilities 5,228,200 7,999,962
Net cash provided by operating activities 50,514,957 35,361,646
Cash flows from investing activities:
Purchase of property and equipment (26,263,896) (21,204,295)
Proceeds from sale of assets 1,372,028 120,941
Restricted investments, net (held to maturity) 907,196 1,501,540
Payments of contingent purchase price (1,548,291) (2,009,671)
Payments of capitalized project costs (1,797,498) (655,519)
Purchases of other companies, net of cash acquired (73,943,865) (63,354,449)
Net cash used in investing activities (101,274,326) (85,601,453)
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - cont'd
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from financing activities:
Due to sellers (231,836) (5,201,439)
Proceeds from debt 17,300,000 182,772,812
Repayment of debt (65,222,174) (79,053,858)
Repayments of capital lease obligations (601,951) (1,550,971)
Payments of financing costs (4,737,000)
Proceeds from exercise of common stock warrants
and options 3,995,794 15,302,757
Net proceeds from issuance of common stock 118,943,071
Subchapter S distributions of pooled entities (168,145) (1,704,621)
Net cash from financing activities 74,014,759 105,827,680
Increase in cash and cash equivalents 23,255,390 55,587,873
Cash and cash equivalents at beginning of period 2,567,854 6,721,849
Cash and cash equivalents at end of period $ 25,823,244 $ 62,309,722
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, net of
amount capitalized $ 7,439,086 $ 6,031,573
Net cash (received) paid during the period for income
taxes $ (1,345,230) $ 3,259,570
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 $ 26,270,128 30,318,792
Other assets, net of cash acquired 65,634,145 50,378,809
Less liabilities assumed (10,249,845) (12,902,755)
The accompanying notes are an integral part of these condense
consolidated financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - cont'd
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Less amount due to seller (3,561,553) (3,170,578)
Less amounts paid in common stock (3,522,479) (1,144,983)
Less deposits and capitalized project costs paid in
prior periods (626,531) (124,836)
Net cash paid $ 73,943,865 $ 63,354,449
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
UNITED WASTE SYSTEMS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
Note 1 - Basis of presentation
The Condensed Consolidated Financial Statements of United Waste Systems,
Inc. and its subsidiaries (the "Company") included herein are unaudited and, in
the opinion of management, such financial statements reflect all adjustments,
consisting only of normal recurring adjustments necessary to present fairly the
results of the interim periods presented. Interim financial statements do not
require all disclosures normally presented in year-end financial statements,
and, accordingly, certain disclosures have been omitted. The Condensed
Consolidated Financial Statements included herein should be read in conjunction
with the Company's Consolidated Financial Statements and related Notes thereto
included herein.
The Company's Condensed Consolidated Statements of Operations and Statement
of Cash Flows for 1996 have been restated to include the accounts of certain
acquisitions completed in 1996, that were accounted for as pooling-of-interests.
See Note 2.
During March 1997, the Company completed a public offering of 3,450,000
shares of United Common Stock. Net proceeds of the offering were approximately
$119.3 million. Approximately $47.2 million of such proceeds were 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.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share ("SFAS 128"), which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating earnings per share, basic
earnings per share will exclude the dilutive effect of the Company's stock
options and warrants. Implementation of SFAS 128 is expected to result in basic
earnings per share for the six months ended June 30, 1997 and 1996 of $.57 and
$.35, respectively, and diluted earnings per share for such periods of $.53 and
$.33, respectively, and basic earnings per share for the three months ended June
30, 1997 and 1996 of $.35 and $.19, respectively, and diluted earnings per share
for such periods of $.32 and $.18, respectively.
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. The adoption of SOP 96-1 did not have a material effect
on the Company's financial position and results of operations.
Note 2 - Acquisitions
The table below provides a summary description of completed acquisitions
(not including acquisitions described below that were accounted for as
pooling-of-interests) during the six months ended June 30, 1997:
<TABLE>
<CAPTION>
Type of Operation Number Acquired
<S> <C>
Landfill 2(1)
Collection companies 37(2)
Transfer stations 7(3)
(1) The landfills are located in Illinois and Nebraska.
(2) The collection companies (including 26 tuck-in acquisitions) are located in
Arizona, California, Illinois, Iowa, Kentucky, Maine, Massachusetts,
Minnesota, New Mexico, North Dakota, Pennsylvania, Rhode Island, Vermont,
and Wisconsin.
(3) The transfer stations are located in California, Kentucky, Minnesota and
Wisconsin.
</TABLE>
The above acquisitions have been accounted for as purchases and,
accordingly, the results of their operations have been included in the Company's
Condensed Consolidated Financial Statements from their respective acquisition
dates.
The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company for the six months ended June 30,
1997 and 1996 as though (i) the acquisitions summarized above (excluding certain
thereof that were not material individually or in the aggregate) which were
consummated in the six months ended June 30, 1997, were made on January 1, 1997,
in the case of the results for the six months ended June 30, 1997, and (ii) each
acquisition which was consummated during the period of January 1, 1996 to June
30, 1997 as described above and in Note 3 to the Notes to Consolidated Financial
Statements included herein (excluding certain thereof that were not material
individually or in the aggregate), was made on January 1, 1996, in the case of
the results for the six months ended June 30, 1996.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Revenues $226,188,143 $184,393,110
Net income 23,992,604 14,152,411
Primary earnings per common share and
common equivalent share .54 .36
Fully diluted earnings per common share and
common equivalent share .53 .36
</TABLE>
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.
During April, May and June 1997, the Company issued 1,368,077 shares of its
common stock for the acquisition of six solid waste management companies. These
transactions were accounted for as pooling-of-interests; however these
acquisitions were not material to the Company's consolidated operations and
financial position and, therefore, the first quarter of 1997 and the 1996
Condensed Consolidated Financial Statements have not been restated.
During February and March 1997, the Company issued 384,472 shares of its
Common Stock for the acquisitions of five solid waste management companies.
These transactions were accounted for as pooling-of-interests; however, these
acquisitions were not material to the Company's consolidated operations and
financial position and, therefore, the 1996 Condensed Consolidated Financial
Statements have not been restated.
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 Condensed Consolidated Financial
Statements have been restated for the three months ended March 31, 1996 to
include the accounts 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 (the "Pooled
Companies"). These transactions were accounted for as pooling-of-interests and,
accordingly, the Condensed Consolidated Financial Statements have been restated
for the three and six months ended June 30, 1996 to include the accounts of the
Pooled 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 pooling-of-interests; however, these acquisitions were not
material to the Company's consolidated operations and financial position and,
therefore, the 1996 Condensed Consolidated Financial Statements have not been
restated.
Note 3 - Contingencies
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) contractor pollution liability insurance that
relates to certain environmental services provided by the Company and (ii)
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 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 moved to summarily dismiss the counterclaims. On March 31, 1997, the
Court granted the Company's motion in part and denied it in part. The Company
intends vigorously to pursue its claims in this action and to defend against the
remaining counterclaims. In the opinion of management, this claim should not
materially affect the financial position or operating results 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 filed 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 or operating results 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 machinery
and equipment with an aggregate replacement value of approximately $150,000.
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 or operating
results of the Company.
On April 17, 1997, a purported class action on behalf of the public
shareholders of the Company entitled Schipper v. United Waste et al., Civil
Action No. 15664-NC, was filed in the Court of Chancery of the State of Delaware
against the Company and each of the members of the Company's Board of Directors
asserting, among other things, that defendants breached their fiduciary duties
to stockholders of the Company in negotiating the Merger Agreement and in
engaging in certain related alleged acts and omissions. The complaint seeks,
among other things, injunctive and other equitable relief against consummation
of the Merger, and damages and costs in an unspecified amount. The Company
believes the claim is without merit.
On June 25, 1997, Richard and Martin Zielinski (the "Claimants") filed a
demand for arbitration against Connecticut Valley Sanitary Waste Disposal, Inc.
("CVSWD"), a subsidiary of United Waste. The Claimants seek approximately
$8,600,000, plus treble damages, based on CVSWD's alleged breaches of
obligations under a lease and Massachusetts law in relation to the operation of
CVSWD's Chicopee, Massachusetts landfill. CVSWD disagrees with Claimants'
contentions and intends to vigorously defend against this claim. CVSWD will be
filing a counter-demand for arbitration, based on the Claimants' breaches of the
lease and Massachusetts law. It is too early to predict the outcome of the
arbitration.
The Company accrues the costs for closure and post-closure monitoring over
the life of its owned landfills and will pay out these costs over the next
thirty 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, post-closure and remediation costs of its landfills
owned at June 30, 1997 will be approximately $71.8 million. At June 30, 1997,
the Company has approximately $53.0 million of these costs accrued and,
therefore, has accrued approximately 73.8% 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.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position with the Company
of each of the directors and executive officers of the Company as of August 26,
1997.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
John E. Drury 53 President and Director
Rodney R. Proto 48 Director
Gregory T. Sangalis 41 Vice President, Secretary and Director
Earl E. DeFrates 53 Executive Vice President, Chief Financial Officer
and Assistant Treasurer
Bruce E. Snyder 41 Vice President, Chief Accounting Officer and
Assistant Secretary
Ronald H. Jones 46 Vice President and Treasurer
</TABLE>
Set forth below is a brief description of the business experience of the
executive officers and directors of the Company.
John E. Drury has been President and a Director of the Company since August
26, 1997. He has been Chief Executive Officer of USA Waste since 1994 and its
Chairman of the Board since 1995. From 1992 to May 1994, Mr. Drury served as a
Managing Director of Sanders Morris Mundy Inc., a Houston based investment
banking firm. Mr. Drury served as President and Chief Operating Officer of
Browning-Ferris Industries, Inc. ("BFI") from 1982 to 1991, during which time he
had chief responsibility for worldwide operations.
Rodney R. Proto has been a Director of the Company since August 26, 1997.
He has been President and Chief Operating Officer of USA Waste since August
1996. Prior thereto, he was President, Chief Operating Officer and a Director
of Sanifill, Inc. ("Sanifill"). Mr. Proto joined Sanifill in February 1992.
Before joining Sanifill, he was employed by BFI for 12 years where he served,
among other positions, as Chairman of BFI Overseas from 1985 to 1987 and
President of Browning-Ferris Industries Europe, Inc. from 1987 through 1991.
Gregory T. Sangalis has been Vice President, Secretary and a Director of
the Company since August 26, 1997. Mr. Sangalis has been the Vice President,
General Counsel and Secretary of USA Waste since April 4, 1995. Prior to
joining USA Waste, Mr. Sangalis was employed by a solid waste subsidiary of WMX
Technologies, Inc. ("WMX"), serving in various legal capacities since 1986 and
including Group Vice President and General Counsel from August 1992 to April
1995. Prior to joining WMX, he was General Counsel of Peavey Company and had
been engaged in the private practice of law in Minnesota.
Earl E. DeFrates has been Executive Vice President, Chief Financial Officer
and Assistant Treasurer of the Company since August 26, 1997. He has been
Executive Vice President and Chief Financial Officer of USA Waste since May
1994. From October 1990 to April 1995, he was also Secretary. Mr. DeFrates
joined USA Waste as Vice President - Finance in October 1990 and was elected
Executive Vice President in May 1994. Prior thereto, Mr. DeFrates was employed
by Acadiana Energy, Inc. (formerly Tatham Oil and Gas, Inc.) serving in various
officer capacities including the Company's Chief Financial Officer, since 1980.
Bruce E. Snyder has been Vice President, Chief Accounting Officer and
Assistant Secretary of the Company since August 26, 1997. He has been Vice
President and Chief Accounting Officer of USA Waste since July 1, 1992. Prior
to joining USA Waste, Mr. Snyder was employed by the international accounting
firm of Coopers & Lybrand L.L.P., serving there since 1989 as an audit manager.
From 1985 to 1989, Mr. Snyder held various financial positions with Price
Edwards Henderson & Co., a privately held real estate development and management
company in Oklahoma City, Oklahoma, and its affiliated companies, ultimately
serving as Senior Vice President.
Ronald H. Jones has been Vice President and Treasurer of the Company since
August 26, 1997. He has been Vice President and Treasurer of USA Waste since
June 1995. Prior to joining USA Waste, Mr. Jones was employed by Chambers
Development Company, Inc. ("Chambers") as Vice President and Treasurer from July
1992 to June 1995, Director, Corporate Development from December 1990 to July
1992, and Assistant Vice President - Finance from July 1989 to December 1990.
Prior to joining Chambers, Mr. Jones was a Vice president and Manager of the
Cincinnati regional office engaged in corporate and middle market lending with
Bank of New York (formerly Irving Trust Company) and with Chase Manhattan Bank.
EXECUTIVE COMPENSATION
All share information under this Item 11 has been adjusted to give effect
to a 2-for-1 stock split effected on June 18, 1996.
Summary Compensation Table
The following table sets forth for the periods indicated information
concerning the compensation of the chief executive officer of the Company and
the four most highly compensated executive officers of the Company (other than
the chief executive officer) during 1996.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation(1) Securities
Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options(#) Compensation
<S> <C> <C> <C> <C> <C>
Bradley S. Jacobs 1996 332,500(2) 174,000 370,000
Chief Executive Officer 1995 272,411(2) 92,482 280,000
1994 196,250(2) 67,500 380,000
Edward T. Sheehan 1996 195,000 62,500 135,000
President 1995 195,000 62,500 120,000
1994 195,000 62,500 160,000 25,000(3)
John N. Milne 1996 150,900(2) 55,000 240,000 1,000(4)
Senior Vice President 1995 153,250(2) 55,000 120,000
1994 153,250(2) 55,000 160,000
Michael J. Nolan 1996 125,000 40,000 135,000 1,000(4)
Chief Financial Officer 1995 112,500 40,000 120,000
1994 102,500 40,000 50,000
Richard A. Volonino 1996 140,000 32,500 35,000 1,000(4)
Executive Vice President 1995 140,000 32,500 23,000
1994 140,000 32,500 30,000
(1) The only type of other annual compensation for each of the named officers
was in the form of perquisites which were in each case less than the level
required for reporting.
(2) Includes directors' fees to Messrs. Jacobs and Milne of $2,500, $8,000 and
$6,250 each in 1996, 1995 and 1994, respectively.
(3) Consists of a one-time payment for relocation expenses.
(4) Represents a contribution by the Company under its 401(K) Plan.
</TABLE>
Options
The following tables summarize the options granted in 1996 to the executive
officers named in the Summary Compensation table above, the potential value of
these options at the end of the option term, assuming certain levels of
appreciation of United's Common Stock, options exercised in 1996 by such
executive officers and the number and value of all options held by such
executive officers at the end of 1996.
Option Grants in 1996
Individual Grants
<TABLE>
<CAPTION>
% of
Total Potential Realizable Value
Number of Options of Assumed Rate of Stock
Securities Granted Exercise Appreciation for Option
Underlying to Price Term(1)
Options Employees Per Expiration
Name Granted(#) in 1996 Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Bradley S. Jacobs 180,000(2) 9.1% $25.00 7/15/06 $7,330,026 $11,671,841
190,000(3) 9.6% 31.00 12/13/06 9,594,189 15,277,143
Edward T. Sheehan 60,000(2) 3.0% 25.00 7/15/06 2,443,342 3,890,614
75,000(3) 3.8% 31.00 12/13/06 3,787,180 6,030,451
John N. Milne 115,000(2) 5.8% 25.00 7/15/06 4,683,072 7,457,010
125,000(3) 6.3% 31.00 12/13/06 6,311,967 10,050,752
Michael J. Nolan 60,000(2) 3.0% 25.00 7/15/06 2,443,342 3,890,614
75,000(3) 3.8% 31.00 12/13/06 3,787,180 6,030,451
Richard A. Volonino 15,000(2) 0.8% 25.00 7/15/06 610,835 972,253
20,000(3) 1.0% 31.00 12/13/06 1,009,915 1,608,120
(1) The dollar amounts under these columns are the result of calculations at
hypothetical 5% and 10% compounded annual appreciation rates prescribed by
the Commission and, therefore, are not intended to forecast possible
future appreciation, if any, of the price of United Common Stock.
(2) Each of these options was exercisable as to 33.3% on July 15, 1996, 33.3%
on July 15, 1997, and as to the balance on July 15, 1998. See
"--Employment Contracts and Change-in-Control Arrangements" for certain
information concerning the effect of the Merger with respect to such
options.
(3) Each of these options was exercisable as to 33.3% on December 13, 1996,
33.3% on December 13, 1997, and as to the balance on December 13, 1998.
See "--Employment Contracts and Change-in-Control Arrangements" for certain
information concerning the effect of the Merger with respect to such
options.
</TABLE>
Aggregated Option Exercises in 1996
and Value of Options at December 31, 1996
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at Year
Options at year End(#) End
Number of
Shares
Acquired Value
Name on Realized Exercisab Unexercisab Exercisable Unexercisab
Exercise le le le
(#)
<S> <C> <C> <C> <C> <C> <C>
Bradley S. Jacobs 596,667 $15,333,280 192,666 504,001 $ 1,868,244 $7,118,014
Edward T. Sheehan 228,596 72,439 177,333 2,371,741
4,515,406 755,314
John Milne 327,780 6,514,931 202,667 267,333 3,235,757 3,345,493
Michael J. Nolan 180,945 3,558,916 71,000 160,667 681,375 1,940,509
Richard A. Volonino 130,865 2,770,304 72,062 42,853 1,578,657 576,355
</TABLE>
Compensation of Directors
During 1996, each director of the Company was paid up to $2,500 per day for
each Board of Directors' meeting such director attended, together with an
expense reimbursement. In addition, members of the Board of Directors who were
not officers were granted options in 1996 as follows: Mr. Andersen (options to
purchase an aggregate of 30,000 shares at an exercise price per share of $25.00
and 40,000 shares at an exercise price per share of $31.00); Mr. Weyer (options
to purchase an aggregate of 36,000 shares at an exercise price per share of
$27.38); and Mr. Williams (options to purchase an aggregate of 36,000 shares at
an exercise price per share of $27.38). The options granted to Mr. Weyer and
Mr. Williams were granted pursuant to the Disinterested Director Plan described
below. For information concerning options granted to directors who were
officers of the Company during 1996, see the table above captioned "Option
Grants in 1996."
Employment Contracts and Change-in-Control Arrangements
Prior to the Merger, the Company had employment agreements (the "Employment
Agreements") with each of the executive officers named in the Summary
Compensation Table above. Certain information with regard to such Employment
Agreements is set forth below.
Base salary was payable at a rate per annum as follow: Mr. Jacobs
($330,000), Mr. Sheehan ($170,000), Mr. Milne ($140,000), Mr. Nolan ($125,000),
and Mr. Volonino ($140,000). The base salary payable to Messrs. Jacobs and
Milne was subject to possible upward adjustment based upon changes in a
designated consumer price index. Certain of the Employment Agreements provided
for a minimum bonus (or other incentive compensation) at a rate per annum as
follows: Mr. Jacobs ($174,000), Mr. Sheehan ($25,000), Mr. Milne ($40,000), and
Mr. Nolan ($40,000). In addition to the bonuses and incentive compensation
specifically provided for, the Company was permitted to pay such additional
bonuses or incentive compensation as authorized by the Board of Directors.
The Employment Agreements with the following executives provided that the
term automatically renewed so that at all times the balance of the term would
not be less than the period hereinafter specified with respect to such
executive: Mr. Jacobs (five years), Mr. Sheehan (two years and three months),
Mr. Milne (three years) and Mr. Nolan (three years). The Company was permitted
at any time to terminate any such Employment Agreement, with or without cause,
provided that the Company was required to make severance payments to the extent
described in the following paragraphs.
The Employment Agreement with each of Messrs. Jacobs and Milne provided
that the executive was entitled to severance benefits in the event that (i) his
Employment Agreement was terminated by the Company without cause (as defined in
the Employment Agreement), (ii) the executive terminates his Employment
Agreement for Good Reason (as so defined) or because of a breach by the Company
of its obligations thereunder or (iii) his employment was terminated as a result
of death or disability. The severance benefits included (i) a lump sum payment
equal to the executive's monthly base salary and minimum annual bonus at the
time of termination for a specified period (three years in the case of Mr.
Jacobs and two years in the case of Mr. Milne) and (ii) the continuation of the
executive's benefits for such specified period. Certain of the other Employment
Agreements provided that the executive was entitled to severance benefits, of up
to six months base salary, in the event that the executive's Employment
Agreement was terminated without cause (as defined in the Employment Agreement).
Certain of the Employment Agreements provided that, if a change of control
(as defined in the Employment Agreement) occurred and the employment of the
executive terminated under specified circumstances, including termination by the
executive within a specified period of time of the change of control, the
executive was entitled to receive a lump-sum payment equal to the base salary
and minimum bonus that would have been payable to him for the balance of the
term (determined as of the date of termination of employment). Based on
compensation levels at the time of the consummation of the Merger, the amount
payable to each executive was as follows: Mr. Jacobs ($2,520,000), Mr. Sheehan
($438,750), Mr. Milne ($540,000), and Mr. Nolan ($495,000). In addition, such
Agreements provided that if any portion of such payment to the executive
constituted an "excess parachute payment" (as defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code")), the executive was
entitled to receive a payment sufficient on an after-tax basis to offset any
excise tax payable by the executive pursuant to Section 4999 of the Code. Any
payment constituting an "excess parachute payment" would not have been
deductible by the Company.
On August 26, 1997, pursuant to the consummation of the Merger, the
Employment Agreements described above were terminated, and the lump-sum payments
to executive officers described in the preceding paragraph were paid. Upon the
effectiveness of the Merger, the executive officers of Riviera Acquisition
Corporation, the wholly-owned subsidiary of USA Waste that was merged with and
into the Company, became the executive officers of the Company.
Pursuant to the Merger, each outstanding option to purchase United Common
Stock (whether or not such option had previously vested or become exercisable)
was canceled in exchange for USA Waste Common Stock having a market value equal
to the fair value of such option, as determined by Price Waterhouse LLP,
independent third party expert.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company during
1996 consisted of J. Bryan Williams, III, its chairman, Bradley S. Jacobs and
Christian Weyer. Mr. Jacobs was also a senior executive officer of the Company
during 1996. No compensation committee interlocks with other companies have
existed through this date.
BENEFICIAL OWNERSHIP
Pursuant to the Merger, all shares of United Common Stock are currently
owned by USA Waste.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Merger, each of the directors and/or officers listed under
"Directors and Executive Officers" became directors and officers, respectively,
of the Company.
EXPERTS
The consolidated financial statements of United Waste Systems, Inc. at
December 31, 1995 and 1996, and for each of the three years in the period ended
December 31, 1996, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
PART II
Item 13. Other Expenses of Issuance and Distribution
The expenses to be paid by the Company in connection with the distribution
of the securities being registered hereunder are set forth in the table below.
All amounts except the registration fee are estimated. For information
concerning certain additional expenses that the Company and/or the Selling
Security Holders may be required to pay in the event that there is an
underwritten offering of the Notes, see "Description of Registration Rights
Agreement-Fees and Expenses".
Securities and Exchange Commission registration fee $44,485
Printing expenses 4,000
Blue sky qualification fees and expenses, including legal fees 5,000
Accounting fees and expenses 7,000
Legal fees and expenses of the Company
(other than related to blue sky)(1) 10,000
Miscellaneous
Total $70,485
________________________
(1) In addition, the Company is required under certain circumstances to pay up
to a maximum of $80,000 for the fees and disbursements of a single counsel
selected to represent Holders of the Offered Securities in connection with
this Registration Statement. See "Description of Registration Rights
Agreement-Fees and Expenses".
Item 14. Indemnification of Directors and Officers.
Pursuant to specific authority granted by Section 102 of the Delaware
General Corporation Law (the "DGCL"), Article X of the Company's Amended and
Restated Certificate of Incorporation contains the following provision regarding
limitation of liability of directors and officers:
"The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by Paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, or any corresponding provision of the General
Corporation Law of the State of Delaware."
The Company, as a Delaware corporation, is empowered by Section 145 of the
DGCL, subject to the procedures and limitation stated therein, to indemnify any
person against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any threatened, pending or completed action, suit or proceeding in which
such person is made a party by reason of his being or having been a director,
officer, employer or agent of the Company. The statute provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise. Article IX of
the Company's Amended and Restated Certificate of Incorporation and Article V
the Company's By-laws both provide for indemnification of its officers and
directors to the full extent permitted by the DGCL. In addition, the Company
has entered into indemnification agreements with each of its directors and
officers. In general, these agreements require the Company to indemnify each of
such persons against expenses, judgments, fines, settlements and other
liabilities incurred in connection with any proceeding (including a derivative
action) to which such person may be made a party by reason of the fact that such
person is or was a director, officer or employee of the Company or guaranteed
any obligations of the Company, provided that the right of an indemnitee to
receive indemnification is subject to the following limitations: (i) an
indemnitee is not entitled to indemnification unless he acted in good faith and
in a manner that he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful and
(ii) in the case of a derivative action, an indemnitee is not entitled to
indemnification in the event that he is judged in a final non-appealable
decision of a court of competent jurisdiction to be liable to the Company due to
willful misconduct in the performance of his duties to the Company (unless and
only to the extent that the court determines that the indemnitee is fairly and
reasonably entitled to indemnification).
Pursuant to Section 145 of the DGCL, the Company has purchased insurance on
behalf of its present and former directors and officers against any liability
asserted against or incurred by them in such capacity or arising out of their
status as such.
Item 15. Recent Sales of Unregistered Securities
Set forth below is certain information concerning sales by the Company of
unregistered securities during the six months ended June 30, 1997 and the three
years ended December 31, 1996. The issuances by the Company of the securities
sold in the transactions referenced below were not registered under the
Securities Act pursuant to the exemption contemplated by Section 4(2) thereof
for transactions not involving a public offering.
<TABLE>
<CAPTION>
SALES OF UNREGISTERED SECURITIES
Three Years Ended December 31, 1996
Six Months ended June 30, 1997
Month and Year Shares Issued
<S> <C>
January 1996 28,298
June 1996 730,765
September 1996 579,857
December 1996 260,076
February 1997 119,523
March 1997 613,463
April 1997 91,935
May 1997 133,799
June 1997 957,797
Total 3,515,695
</TABLE>
The above issued shares of United Common Stock were issued to acquire three
landfills, eleven transfer stations and 16 collection companies and certain
related assets.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Exhibit Number and Exhibit
2.1 Agreement and Plan of Merger, dated as of April 13, 1997, by and among
USA Waste, Riviera Acquisition Corporation and the Company (incorporated
by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K
filed April 16, 1997)
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 Company's to the
Registration Statement on Form S-8 Commission File No. 333-14489))
3.2* Certificate of Merger, dated as of August 26, 1997, by and among the
Company, USA Waste and the Trustee
3.3 By-laws (Incorporated by reference to Exhibit 3.5 to the Company's
Registration Statement on Form S-1 (Commission File No. 33-53488))
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
Company'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. (Incorporated
by reference to Exhibit 4.8 to the Company's Quarterly Report on Form S-
1 (Commission File No. 33-53488))
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 Quarterly Report on Form 10-Q for the 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 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
Company's Quarterly Report on Form 10-Q for the period ended September
30, 1996)
4.6* Supplemental Indenture, dated as of August 26, 1997, by and among the
Company, USA Waste and Bankers Trust Company as Trustee
4.7 Registration Rights Agreement dated June 5, 1996 between the Company and
Goldman Sachs & Co. and others (Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30 1996)
5.1* Opinion of Ehrenreich & Krause (included as Exhibit 5.1 to the original
Registration Statement on Form S-3, filed by the Company on August 30,
1996)
10.1+ 1992 Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-1 (Commission File No. 33-
53488)).
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. (Incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-1 (Commission File No. 33-
53488)).
10.4 Site Lease dated as of March 20, 1989 between the City of Springfield
and Resource Control Composting, Inc. (Incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form S-1
(Commission file No. 33-53488)).
10.5 Solid Waste Disposal Services Agreement dated February 12, 1992 among
the City of Fitchburg, the Town of Westminster and RCI Fitchburg, Inc.
(Incorporated by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-1 (Commission File No. 33-53488)).
10.6+ Amended and Restated Employment Agreement dated June 20, 1995 between
the Company and Bradley S. Jacobs. (Incorporated by reference to
Exhibit 10.2 to the Company'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
the Company and Edward T. Sheehan. (Incorporated by reference to
Exhibit 10.6 to the Company'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
the Company and John N. Milne. (Incorporated by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1995)
10.9+ Employment Agreement dated September 27, 1991 between the Company and
Richard Volonino, together with an amendment thereto dated November 11,
1992 (Incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1 (Commission File No. 33-53488)).
10.10+ Amended and Restated Employment Agreement dated June 20, 1995 between
the Company and Michael J. Nolan. (Incorporated by reference to Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1995)
10.11+ Form of Indemnification Agreement entered into by the Company with each
of its officers and directors (Incorporated by reference to Exhibit
10.20 to the Company's Registration Statement on Form S-1 (Commission
file No. 33-53488)).
10.12+ Agreement dated as of October 1, 1991 between the Company and Bradley S.
Jacobs (Incorporated by reference to Exhibit 10.21 to the Company's
Registration Statement on Form S-1 (Commission File No. 33-53488)).
10.13+ Form of Warrant dated as of October 17, 1992 issued by the Company to
John N. Milne. (Incorporated by reference to Exhibit No. 10.25.1 to the
Company'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 Company to
John N. Milne. (Incorporated by reference to Exhibit No. 10.25.2 to the
Company'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
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 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
Company together with an amendment thereto dated November 12, 1992
(Incorporated by reference to Exhibit 10.72 to the Company's
Registration Statement on Form S-1 (Commission File No. 33-53488)).
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 (Incorporated by reference to Exhibit 10.76 to the Company's
Registration Statement on Form S-1 (Commission File No. 33-53488)).
10.19 Acquisition Agreement dated April 1, 1992 among the Company, 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. (Incorporated by reference to Exhibit 10.77 to the
Company's Registration Statement on Form S-1 (Commission File No. 33-
53488)).
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 the Company dated December 29, 1992 (Incorporated by
reference to Company'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 Company's Registration Statement
on Form S-1 (Commission File No. 33-70832))
10.22 Asset Purchase Agreement among the Company, 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 Company's Current Report on Form 8-K
dated May 15, 1993)
10.23 Agreement and Plan of Reorganization among the Company, 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 Company's Current
Report on Form 8-K dated May 15, 1993)
10.24 Merger Agreement dated May 14, 1993, among the Company, 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 Company's Current Report on Form 8-K dated May 14, 1993)
10.25 Merger Agreement dated May 14, 1993, among the Company, Holland
Acquisition, Inc., West Michigan Disposal Company, George R. Slater and
Margaret E. Slater. (Incorporated by reference to the Company's Current
Report on Form 8-K dated May 14, 1993)
10.26+ Amendment to 1992 Stock Option Plan (Incorporated by reference to
Exhibit 10.26 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.28 Form of Underwriting Agreement dated July 1995, between the Company, and
Goldman, Sachs & Co. and Prudential Securities Incorporated as
representatives of the several underwriters (Incorporated by reference
to Exhibit 1 to the Company'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 Company's
Registration Statement on Form S-3, Commission File No. 33-86380)
10.30+ Amended and Restated Employment Agreement dated June 20, 1995 between
the Company, and Robert P. Miner. (Incorporated by reference to Exhibit
10.4 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1995)
10.31 Agreement dated as of September 29, 1995, among the Company, 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 Company'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
the Company, 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 Company'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 Company,
Goldman Sachs & Co. and the other underwriters named therein.
(Incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30 1996)
10.34 Underwriting Agreement dated as of March 3, 1997 among the Company,
Goldman, Sachs & Co. and other underwriters named herein (Incorporated
by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1996)
11.1 Computation of Earnings Per Share (Incorporated by reference to Exhibit
11.1 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 and Exhibit 11 to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1997)
12.1* Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company (Incorporated by reference to Exhibit 21.1
to the Company's Annual Report on Form 10-K for the year ended December
31, 1996)
23.1* Consent of Ernst & Young LLP
23.2 Consent of Ehrenreich & Krause (included in Exhibit 5.1)
24.1* Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust Indenture Act
of 1939, as amended, on Form T-1 of Bankers Trust Company (included as
Exhibit 25.1 to the Company's Registration Statement on Form S-3/A,
filed by the Company on November 22, 1996)
99.1 Independent Auditors Report of Hanson Rotter & Green (Incorporated by
reference to Exhibit 99.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996)
_______________________________________________
* This exhibit is filed herewith.
+ These exhibits are executive officer or director compensatory contracts
or plans.
(b) Financial Statement Schedules
UNITED WASTE SYSTEMS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
<TABLE>
<CAPTION>
Balance at Charged
Beginning of to Costs and Balance the end
Period Expenses Other(1) Deductions(2) of 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 account $1,830,792 $1,032,149 $ 140,000 $1,053,462 $1,949,479
(1) Consists of reserves assumed through acquisitions in 1996, 1995 and
1994, respectively.
(2) Uncollectible accounts written-of, net of recoveries.
</TABLE>
Item 17. Undertakings.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Company hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities and Exchange
Act of 1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the Company has
duly caused this Post-Effective Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, hereunto duly authorized, in the City
of Houston, State of Texas, on the 10th day of November, 1997.
UNITED WASTE SYSTEMS, INC.
By: /s/ GREGORY T. SANGALIS
Gregory T. Sangalis
Vice President and Secretary
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John E. Drury, Earl E. DeFrates and Gregory T.
Sangalis and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (including his capacity as a director
and/or officer of United Waste Systems, Inc.) to sign any or all amendments
(including pre-effective and post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intends and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C>
/s/ JOHN E. DRURY President and Director November 10, 1997
John E. Drury (Principal Executive
Officer)
/s/ RODNEY R. PROTO Director November 10, 1997
Rodney R. Proto
/s/ EARL E. DEFRATES Executive Vice President, November 10, 1997
Earl E. DeFrates Chief Financial Officer and
Assistant Treasurer
(Principal Financial
Officer)
/s/ GREGORY T. SANGALIS Vice President, Secretary November 10, 1997
Gregory T. Sangalis and Director
/s/ BRUCE E. SNYDER Vice President, Chief November 10, 1997
Bruce S. Snyder Accounting Officer and
Assistant Secretary
/s/ RONALD H. JONES Vice President and Treasurer November 10, 1997
Ronald H. Jones
</TABLE>
Exhibit Index
3.2 Certificate of Merger, dated as of August 26, 1997, of Riviera
Acquisition Corporation with and into the Company
4.6 Supplemental Indenture, dated as of August 26, 1997, by and among the
Company, USA Waste and the Trustee
12.1 Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
24.1 Power of Attorney (included on signature page)
Exhibit 3.2
CERTIFICATE OF MERGER OF
RIVIERA ACQUISITION CORPORATION
WITH AND INTO
UNITED WASTE SYSTEMS, INC.
UNITED WASTE SYSTEMS, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY THAT:
1. The name of the constituent corporations are Riviera Acquisition
Corporation ("Acquisition"), a Delaware corporation, and United Waste Systems,
Inc., an Delaware corporation ("United").
2. The Agreement and Plan of Merger among USA Waste Services, Inc., a
Delaware corporation, Acquisition and United, dated as of April 13, 1997 (the
"Merger Agreement") has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with Section
251 of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation of the merger is United Waste
Systems, Inc., a Delaware corporation.
4. The Certificate of Incorporation of United shall be the Certificate of
Incorporation of the surviving corporation.
5. The executed Merger Agreement is on file at the principal place of
business of United located at First City Tower, 1001 Fannin, Houston, Texas
77002.
6. A copy of the Merger Agreement will be furnished by United, on request
and without cost, to any stockholder of United or Acquisition.
* * * *
IN WITNESS WHEREOF, United Waste Systems, Inc. has caused this Certificate
of Merger to be signed by Gregory T. Sangalis, its Vice President and Secretary
and attested by Bryan J. Blankfield, its Secretary, as of this 26th day of
August, 1997.
By: /s/ GREGOROY T. SANGALIS
-----------------------------------------
Gregory T. Sangalis
Vice President and Secretary
United Waste Systems, Inc.
Attest:
By: /s/ BRYAN J. BLANKFIELD
------------------------------------------
Bryan J. Blankfield
Assistant Secretary
United Waste Systems, Inc.
Exhibit 4.6
UNITED WASTE SYSTEMS, INC.
AND
USA WASTE SERVICES, INC.
TO
BANKERS TRUST COMPANY
as Trustee
____________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 26, 1997
____________________
Supplementing and Amending Indenture Dated as of June 5, 1996
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of August 26, 1997 (the
"Supplemental Indenture"), is by and among United Waste Systems, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called "United" or the "Company"), having its principal executive office
at Four Greenwich Office Park, Greenwich, Connecticut 06830, USA Waste Services,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called "USA Waste"), having its principal executive office at
First City Tower, 1001 Fannin Street, Suite 4000, Houston, Texas 77002, and
Bankers Trust Company, a New York banking association, as Trustee (herein called
the "Trustee").
RECITALS OF UNITED AND USA WASTE
United has executed and delivered to the Trustee its Indenture, dated as of
June 5, 1996 (herein called the "Indenture"), to provide for the issuance of
$150,000,000 aggregate principal amount of its 4-1/2% Convertible Subordinated
Notes Due June 1, 2001 (the "Securities").
Pursuant to the Indenture, United has issued Securities in an original
principal amount of $150,000,000, all of which are currently outstanding. No
other securities have been issued pursuant to the Indenture.
Effective as of August 26, 1997 (the "Merger Date"), Riviera Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of USA Waste,
was merged with and into United pursuant to the provisions of the General
Corporation Law of the State of Delaware (the "Merger"), as a result of which
United became a wholly-owned subsidiary of USA Waste.
Each share of common stock of United which was issued and outstanding
immediately prior to the Merger was, by virtue of the Merger and without any
action on the part of the holder thereof, converted into 1.075 shares of the
common stock, par value $0.01 per share, of USA Waste (the "USA Waste Shares").
In connection with the Merger, United and USA Waste, pursuant to
appropriate resolutions of their respective Boards of Directors, have duly
determined to make, execute and deliver to the Trustee this Supplemental
Indenture in order to reflect the results of the Merger as required by the
Indenture.
Pursuant to Section 12.11 of the Indenture, United, as the survivor in the
Merger, is required to execute and deliver to the Trustee an indenture
supplemental to the Indenture in connection with the Merger.
The Indenture provides that, without the consent of any Holders, United and
the Trustee may enter into a supplemental indenture to make provision with
respect to the conversion rights of Holders pursuant to the requirements of
Article Twelve of the Indenture, and United has determined that this
Supplemental Indenture may therefore be entered into without the consent of any
Holder in accordance with Section 8.1(5) of the Indenture.
United and USA Waste have duly authorized the execution and delivery of
this Supplemental Indenture and all things necessary have been done to make this
Supplemental Indenture a valid agreement of United and USA Waste, in accordance
with its terms.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually agreed, for the
equal and proportionate benefit of the respective Holders from time to time of
the Securities, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 101. Indenture Terms.
Capitalized terms used but not defined in this Supplemental Indenture have
the respective meanings assigned to them in the Indenture.
ARTICLE TWO
CONCERNING THE SECURITIES
SECTION 201. Conversion Privilege.
The Holder of each Security Outstanding on the date hereof shall have the
right from and after the date hereof, during the period such Security shall be
convertible as specified in Section 12.1 of the Indenture, to convert such
Security only into the number of USA Waste Shares, and cash in lieu of
fractional USA Waste Shares, receivable upon the effectiveness of the Merger by
a holder of the number of shares of Common Stock of the Company into which such
Security might have been converted immediately prior to the Merger, subject to
adjustment as provided in Section 202 below.
SECTION 202. Conversion Price.
The price at which USA Waste Shares shall be delivered upon conversion of
Securities (herein called the "Conversion Price") shall be the price specified
in Section 12.1 of the Indenture, as adjusted in accordance with Article Twelve
of the Indenture prior to the Merger. For events subsequent to the effective
date of this Supplemental Indenture, the Conversion Price shall be adjusted in a
manner as nearly equivalent as may be practical to the adjustments provided for
in Article Twelve of the Indenture.
ARTICLE THREE
CONCERNING THE TRUSTEE
SECTION 301. Terms and Conditions.
The Trustee accepts this Supplemental Indenture and agrees to perform the
duties of the Trustee upon the terms and conditions herein and in the Indenture
set forth.
SECTION 302. No Responsibility.
The Trustee shall not be responsible in any manner whatsoever for or in
respect of (i) the validity or sufficiency of this Supplemental Indenture, the
authorization or permissibility of this Supplemental Indenture pursuant to the
terms of the Indenture or the due execution thereof by United or USA Waste or
(ii) the recitals herein contained, all such recitals being made by United and
USA Waste. The Trustee shall not be responsible in any manner to determine the
correctness of provisions contained in this Supplemental Indenture relating
either to the kind or amount of securities receivable by Holders of Securities
upon the conversion of their Securities after the Merger or to any adjustment
provided herein.
ARTICLE FOUR
EFFECT OF EXECUTION AND DELIVERY HEREOF
From and after the execution and delivery of this Supplemental Indenture,
(i) the Indenture shall be deemed to be amended and modified as provided herein,
(ii) this Supplemental Indenture shall form a part of the Indenture,
(iii) except as modified and amended by this Supplemental Indenture, the
Indenture shall continue in full force and effect, (iv) the Securities shall
continue to be governed by the Indenture, as modified and amended by this
Supplemental Indenture, and (v) every Holder of Securities heretofore and
hereafter authenticated and delivered under the Indenture shall be bound by this
Supplemental Indenture.
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
SECTION 501. Headings Descriptive.
The headings of the several Articles and Sections of this Supplemental
Indenture are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Supplemental Indenture.
SECTION 502. Rights and Obligations of the Trustee.
All of the provisions of the Indenture with respect to the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect of this Supplemental Indenture as fully and with the same effect as if
set forth herein in full.
SECTION 503. Successors and Assigns.
This Supplemental Indenture shall be binding upon and inure to the benefit
of and be enforceable by the respective successors and assigns of the parties
hereto and the Holders of any Securities then Outstanding.
SECTION 504. Counterparts.
This Supplemental Indenture may be executed in several counterparts, each
of which shall be an original and all of which shall constitute but one and the
same instrument.
SECTION 505. Governing Law.
This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York.
[The next page is the signature page]
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
UNITED WASTE SYSTEMS, INC.
By: /s/ BRADLEY S. JACOBS
--------------------------------------
Name: Bradley S. Jacobs
Title: Chairman of the Board and Chief
Executive Officer
Attest:
By: /s/ JOHN N. MILNE
--------------------------------
Name: John N. Milne
Title: Secretary
USA WASTE SERVICES, INC.
By: /s/ GREGORY T. SANGALIS
--------------------------------
Name: Gregory T. Sangalis
Title: Vice President, General Counsel and
Secretary
Attest:
By: /s/ EARL E. DeFRATES
----------------------------
Name: Earl E. DeFrates
Title: Executive Vice President
and Chief Financial Officer
BANKERS TRUST COMPANY
By: /s/ SUSAN JOHNSON
------------------------------
Name: Susan Johnson
Title: Associate Vice President
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On the 26th day of August, 1997, before me personally came Bradley S.
Jacobs, to me known, who, being by me duly sworn, did depose and say that he is
Chairman of the Board and Chief Executive Officer of United Waste Systems, Inc.,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation; and that he signed his name thereto
by like authority.
By: /s/ DEBORAH S. BRIGGS
-----------------------------------
Deborah S. Briggs
(SEAL)
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On the 26th day of August, 1997, before me personally came Gregory T.
Sangalis, to me known, who, being by me duly sworn, did depose and say that he
is Vice President, General Counsel and Secretary of USA Waste Services, Inc.,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation; and that he signed his name thereto
by like authority.
By: /s/ DEBORAH S. BRIGGS
-----------------------------------
Deborah S. Briggs
(SEAL)
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the 26th day of August, 1997, before me personally came Susan Johnson,
to me known, who, being by me duly sworn, did depose and say that he is
Assistant Vice President of Bankers Trust Company, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
By: /s/ MARGARET BEREZA
-----------------------------------
Margaret Bezera
(SEAL)
Exhibit 12.1
UNITED WASTE SYSTEMS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended
June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <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 $40,810,013
Fixed charges 3,309,877 5,179,058 7,335,587 11,713,791 17,383,361 9,975,569
Less:
Capitalized interest (156,897) (301,000) (722,000) (1,349,000) (1,682,000) (1,200,000)
Amortization of previously
capitalized interest 145,916 125,849 173,983 263,916 376,049 309,401
Total earnings $ 6,567,451 $21,489,493 $35,741,292 4,238,050 $76,726,488 $49,894,983
Interest expense $ 3,028,133 $ 4,705,363 $ 6,424,630 $10,061,290 $14,949,746 $ 7,898,849
Interest capitalized 156,897 1,200,000 301,000 722,000 1,349,000 1,682,000
Amortization of debt
issue costs 52,523 123,470 146,134 260,000 647,115 786,720
Interest portion of
rental expense 72,324 49,225 42,823 43,501 105,500 90,000
Total fixed charges $ 3,309,877 $ 5,179,058 $ 7,335,587 $11,713,790 $17,383,361 $ 9,975,569
Ratio of earnings to
fixed charges 2.0 4.1 4.9 4.6 4.4 5.0
</TABLE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use 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. at December 31, 1995 and 1996, and
for each of the three years in the period ended December 31, 1996, in the
Registration Statement (Post-effective amendment No. 1 on Form S-1 to Form S-3
No. 333-11109) and the related Prospectus of United Waste Systems, Inc. for the
registration of up to $137,800,000 principal amount of 4-1/2% Convertible
Subordinated Notes filed with the Securities and Exchange Commission on November
12, 1997.
/s/ Ernst & Young LLP
MetroPark, New Jersey
November 7, 1997
